Republicans Eliminate Extremely Popular Tax Deduction in Tax Reform Push
(Business Insider) The House passed the Senate's budget resolution on Thursday by a vote of 216 to 212, in the last procedural step before the GOP can move to fast track tax reform legislation that is expected to be unveiled next week.
Every Democrat voted against the bill, along with 20 Republicans.
Republican leaders succeeded with the vote despite some last-minute hand wringing, since the Republican tax reform framework proposes the elimination of the state and local tax deduction. The deduction allows people to shave off what they pay in state and local taxes from their federal tax bill.
By eliminating the SALT deduction, Republicans would offset a significant amount of their planned tax cuts — saving $1.3 trillion over 10 years, according to an analysis by the Tax Policy Center.
However, Republicans from high-tax states like California, New York, and Massachusetts where many people take the deduction expressed last minute concerns about the elimination of the deduction. For instance, Rep. Frank LoBiondo of New Jersey tweeted that he would vote no on the budget.
Chris Krueger, an analyst at Cowen Washington Research Group, said there were enough members from these high SALT deduction states to block the budget.
"There are 52 House Republicans in the 24-seat majority who represent districts that over-index to the deduction (California, Illinois, New York, New Jersey, Minnesota, etc.)," Krueger wrote Thursday. "There is a core group (presumably enough to block the budget) who are threatening to withhold their votes on the budget if there is not a guarantee to protect SALT."
In the end, no California Republicans voted against the budget, along with a handful of New York Republicans.
Passing the Senate budget resolution was a key for tax reform because the measure includes instructions for budget reconciliation. The reconciliation process allows a bill to pass the Senate with a majority of votes. Since the GOP only has a 52-seat majority in the Senate, reconciliation is key to avoiding a Democratic filibuster.
Republicans celebrated the passage of the budget, including the president applauding the win via Twitter.
"Big news - Budget just passed!" Trump said.