SALT Cap, Tax Overhaul Plague Tax-Writers in Tight Races

From Daily Tax Report®

September 20, 2018

By Michael Bologna, Christopher Brown, Christopher Marr, and Kaustuv Basu

Five congressional tax-writers—two on the Senate Finance Committee and three on the House Ways and Means Committee—are fighting for their political lives in midterm election races.

The outcomes may have consequences for tax policy and add to the upheaval on these panels.

The Cook Political Report currently lists Ways and Means Republicans Peter Roskam (Ill.), Erik Paulsen (Minn.), and Mike Bishop (Mich.) and Finance Committee Democrats Bill Nelson (Fla.) and Claire McCaskill (Mo.) as being in competitive races that candidates of either party could win.

The committees are gearing up for changes. Finance Chairman Orrin G. Hatch (R-Utah) plans to retire at the end of the current session, which means that either Charles E. Grassley (R-Iowa) or Michael D. Crapo (R-Idaho) could lead the committee in 2019 if Republicans maintain control of the Senate.

Six Republicans on Ways and Means, including Dave Reichert (Wash.) and Sam Johnson (Texas), won’t return next next year because they are retiring or seeking statewide offices. Among the committee Democrats, Sander Levin (Mich.) is retiring and Joseph Crowley (N.Y.) lost his bid for re-election in the primaries. If the Democrats take control of the House, that could mean more seats for Democrats on the committee.

In other words, Ways and Means could have a radically different composition, and Finance’s priorities could change. A Democratic takeover of the House would mean a focus on trying to unravel parts of the 2017 tax law, such as the $10,000 cap on state and local tax deductions; efforts to get President Donald Trump’s tax returns; and new emphasis on family and working class issues like the earned income tax credit.

Here are brief looks at the five lawmakers in close districts and what they say about the tax code overhaul.

Rep. Peter Roskam (R-Ill.)

Roskam, who formerly chaired the Ways and Means Tax Policy Subcommittee, is a leading supporter of the 2017 tax law (Pub. L. No. 115-97). He served on the conference committee for the tax bill, where Republican leaders decided the final contents of the legislation Trump signed in December.

He told the Chicago Tribune editorial board Aug. 22 that the tax cuts were worth the costs. “We borrowed money to get a simpler and updated tax code,” he said. “The other thing that we get is a growing economy.” At a committee meeting in May, he blasted criticism of the law as “obtuse and hyperbole in a lot of ways.”

Roskam, who has been in Congress since 2007, is under pressure from Sean Casten, his Democratic opponent—a scientist, entrepreneur, and political newcomer. Casten has repeatedly attacked Roskam for his support of the tax law.

A Sept. 10 news release from Casten’s campaign attacked Roskam for his support of the state and local tax (SALT) deduction cap, using Internal Revenue Service figures that show that the five counties that make up the Illinois 6th Congressional District had the largest average SALT deduction in the state. “In every case, the average SALT deduction exceeded the $10,000 annual cap in Roskam’s bill, meaning that 6th District residents will be ‘double-taxed’ on the amount above the cap they pay in state and local taxes,” the release said.

Roskam has a considerable campaign war chest compared with his Democratic opponent. The Federal Election Commission reported Roskam had raised $4.4 million since Jan. 1, 2017, and spent $2.2 million. He had $2.3 million in cash as of June 30, according to the FEC. Meanwhile, Casten had raised $2 million and spent $1.4 million on the race. Casten had $647,000 in cash to spend on the race on June 30.

Rep. Erik Paulsen (R-Minn.)

Paulsen has represented Minnesota’s 3rd Congressional District since 2009, but an interactive poll by the New York Times and Siena College showed his Democratic opponent, Dean Phillips, holding a nine-point lead as of Sept. 17. The Cook Political Report moved the race from “toss up” to “lean Democratic” on Sept. 19.

Phillips, heir to a liquor fortune and an entrepreneur who has launched successful gelato and coffee businesses, has criticized Paulsen for his unwavering support of the tax law.

The political newcomer has frequently attacked the $10,000 federal SALT deduction limit, saying it will have an unfair impact on middle-class homeowners in the suburban Minneapolis district.

Paulsen has promoted the tax law, pointing to the booming economy and the unemployment rate in his district, one of the lowest in the U.S.

He spoke up for the law at an Aug. 21 debate at the Twin West Chamber of Commerce, saying the overhaul was necessary to avoid a recession, minnpost.com reported.

Paulsen has raised $3.9 million since the beginning of 2017 in his bid for re-election, according to the most recent data from the FEC. He had spent $1.5 million by the end of July and has $2.7 million in cash heading into the home stretch. In comparison, Phillips has raised $2.5 million and spent $1.6 million. Phillips had $836,000 in cash as of July 25, the FEC said.

Rep. Mike Bishop (R-Mich.)

Bishop, who joined Ways and Means in early 2017, said at the time that his tax priorities would mirror those of the committee. Like other committee Republicans, he consistently supported the overhaul as the measure made its way through Congress.

Asked about the 2017 tax law, Bishop said most constituents he had talked to in his district have been “positively impacted” by it. Bishop said many people in his district say tax reform is the reason the economy is booming right now.

His opponent, Elissa Slotkin, is one of the best-funded Democratic challengers competing for a House seat. She has previously held national security positions in Democratic and Republican administrations.

Slotkin was attacking Bishop’s support for tax overhaul as early as November 2017, when she said in a Facebook post that Bishop “needs to account for how it will impact real people in his own district. The median household income here is $66,000. Solidly middle class.”

“The onus is on Rep. Mike Bishop to explain why the deal he cut makes sense for the people who elected him,” she said.

The race in Michigan’s 8th District has been rated a toss-up by the Cook Political Report since mid-July.

Bishop had raised a total of $2.2 million by mid-July, spent about $584,000, and had $1.7 million on hand. Slotkin’s financial report showed total receipts of $3 million and spending of $657,000 in mid-July. She had $2.4 million cash on hand.

Sen. Bill Nelson (D-Fla.)

Nelson opposed the GOP tax cut plan leading up to the bill’s December 2017 passage. Like many other Democratic senators, he accused its supporters of cutting taxes for big business at a time when the federal Children’s Health Insurance Program (CHIP) coverage was in limbo and millions in Puerto Rico were still without reliable electricity or drinking water months after hurricanes flattened the island, a U.S. territory.

The Florida senator’s vulnerable status has attracted attacks from Senate Majority Leader Mitch McConnell (R-Ky.), who said that Nelson “preferred that more of middle-class families’ money remain with the IRS.”

Although Nelson opposed the tax reform measure, the 2017 law includes a provision based on a bill he introduced to let some new owners of citrus groves immediately write off replanting costs after a blight or emergency.

His challenger, outgoing Florida Gov. Rick Scott (R), has tried to put the four-term senator on the defensive with heavy spending.

Scott’s campaign raised $31 million—about two-thirds of it from his personal wealth—and spent nearly $28 million through early August. His cash on hand totaled more than $3.3 million. Nelson has raised $20 million and spent about $6 million, with $14.6 million in cash as of early August.

Sen. Claire McCaskill (D-Mo.)

McCaskill, like other Senate Democrats, voted against the 2017 tax reform law, but she has been trying to “split the baby” on the campaign trail, telling voters that she favors rolling back the parts of the package that favor the wealthy, but keeping provisions that benefit the middle class.

She has criticized Republicans for not reaching across the aisle in putting together the tax law, and says she would welcome the chance to develop a truly bipartisan approach.

McCaskill, who was elected in 2006, is among 10 Senate Democrats running for re-election in states won by Trump. An average of polling data by Real Clear Politics showed her Republican opponent, Josh Hawley, up by 0.6 percentage points as of Sept. 17. Real Clear Politics calls the race “one of the closest in the country.”

Hawley, the Missouri attorney general, has been reminding voters of McCaskill’s vote on the 2017 tax bill at every turn, while trumpeting what he says is the success of tax reform in the state. He has pointed to a string of announcements from Missouri companies earlier this year that said they were expanding production, adding jobs, and giving workers bonuses because of the new law.

The McCaskill campaign had received $22.8 million in contributions as of July 18 and spent $16.2 million; her cash on hand amounts to $6.6 million. Hawley received $5.3 million, spent just under $3 million, and had $2.3 million cash on hand in mid-July.


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