Mayors Urging Congress to Save Tax Deduction

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Che Odom

The U.S. Conference of Mayors is approaching congressional members on recess this week to press for preservation of the federal deduction for taxes paid to local and state governments.

“We have an ongoing campaign with key Republican lawmakers,” Tom Cochran, CEO and executive director of the U.S. Conference of Mayors, said Oct. 16 during a conference call with reporters.

“Silently, this week, mayors are talking to members of Congress back home,” he added. “You can’t really judge what people are saying but how they vote.”

The mayors aren’t alone, Cochran said. Realtors, firefighters, governors, and school superintendents, “who know how to head count,” are also campaigning for preserving the deduction.

“It’s a numbers game,” he said. “Who’s got the votes? That’s what it is about.”

The Republican tax framework, released Sept. 27, would eliminate many deductions for individuals, including the break for state and local taxes. Eliminating the deduction would generate approximately $1.3 trillion over 10 years to pay for tax cuts in the GOP plan, but Republicans from states with higher taxes have expressed concern it could raise taxes for their constituents. They are trying to convince the House Ways and Means Chairman Kevin Brady (R-Texas) and other GOP leaders to soften the blow of cutting the tax break.

GOP Support

Some top Republicans have hinted they may be flexible on the deduction, including White House economic adviser Gary Cohn and Senate Finance Committee Chair Orrin G. Hatch (R-Utah). Cohn and Hatch were among the six people, along with Brady, House Speaker Paul D. Ryan (R-Wis.), Senate Majority Leader Mitch McConnell (R-Ky.), and Treasury Secretary Steven Mnuchin, that developed the framework.

In fact, President Donald Trump reportedly has grown angry over the plan to ax the deduction after learning it would hurt some middle-income taxpayers, two sources familiar with his thinking told Bloomberg News.

New Orleans Mayor Mitch Landrieu (D), president of the U.S. Conference of Mayors, said Oct. 16 that they met with members of Congress and the White House three weeks ago, just after the tax framework was released to express opposition to the deduction’s repeal.

“State and local governments are the one level of government that people feel is still working well,” Landrieu said. Elimination of the deduction would hurt the state and local governments when raising revenue for local services, such as a public safety, fire protection, schools and water safety, he said. That money would be “taxed twice” if the deduction isn’t preserved, he added.

Package As a Whole

However, Ryan last week urged people to look at the final tax package as a whole when it is released, saying the elimination of “carve-outs” and “loopholes” is part of a plan that would lead to a simpler, more transparent tax code that would stimulate the economy and lead to job growth.

Ryan, who said Congress would work through Christmas if needed to get tax reform enacted, said the state and local deduction acts to prop up “profligate, big-government states” that have enacted relatively high tax rates, relying on their taxpayers to take a deduction on their federal filings.

To contact the reporter on this story: Che Odom in Washington at COdom@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State