Finance

Blue-state Republicans say they will vote against 'tax cuts 2.0' if it extends SALT cap

Four blue-state Republicans say they will be "forced to oppose" a second round of tax cuts if the legislation includes a provision permanently extending the $10,000 cap on the state and local tax (SALT) deduction.

The House Ways and Means Committee is scheduled to consider legislation on Thursday that makes permanent the individual tax changes in President Trump's 2017 tax law, including the SALT deduction cap. The measure is expected to receive a vote on the House floor later this month.

GOP Reps. Dan Donovan (N.Y.), Pete King (N.Y.), Frank LoBiondo (N.J.) and Chris Smith (N.J.) all voted against last year's tax-cut legislation because of the SALT deduction cap and are urging House GOP leaders to avoid cementing the provision with the new legislation.

"We urge leadership to stop any effort to permanently cap the deduction for State and Local taxes at $10,000 or we would be forced to oppose the bill," the Republican lawmakers wrote in a letter to Speaker Paul Ryan (R-Wis.) and House Ways and Means Committee Chairman Kevin Brady (R-Texas). The letter was dated Friday and released on Wednesday.

The New York and New Jersey Republicans said that the SALT deduction cap disproportionately impacts their states, which send more to the federal government in taxes than they receive back. The lawmakers expressed concerns that curbing the deduction will hurt housing prices.

"The state and local tax deduction promotes homeownership, increased funding for local infrastructure projects, public education and other state run services - programs that help foster U.S. production and reduce income inequality," the lawmakers wrote.

"Eliminating this deduction will eliminate the incentive for people to live where local government stewards the public. The cost of these local public services in communities across the country, especially in New York and New Jersey, will only increase further, negatively impacting those who benefit from these programs every day."

Besides the SALT deduction cap, the 2017 tax law's cuts to individual tax rates, increase in the standard deduction and increase in the child tax credit also are currently set to expire after 2025.

The blue-state GOP lawmakers said they support making the individual tax cuts permanent but said they "cannot sit idle as a deduction that benefits Americans across the country is permanently dismantled."

Donovan, King, LoBiondo and Smith aren't the only blue-state Republicans who have come out against the second round of tax cuts over concerns about the SALT deduction. Rep. Leonard Lance (R-N.J.), who also voted against the 2017 law, has said he opposes the second tax package.

Lance and Donovan are both running for reelection in competitive races, while LoBiondo is retiring.

Brady has defended the SALT deduction cap, arguing that blue-state governors should cut their states' taxes.

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