State Lawmakers Urge Group to Shift Stance on 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

A national group of state lawmakers has a little controversy on its hands regarding its opposition to GOP plans to scrap a federal deduction for taxes paid to state and local governments.

Some members of the National Conference of State Legislatures who come from states that may not benefit as much from the deduction want the group to rethink its opposition. Those members include North Dakota Sen. Dwight Cook (R) and Wisconsin Rep. John Macco (R), who say elimination of the deduction may ultimately be good for their constituents because ending it would help pay for income tax cuts.

At a Nov. 18 meeting in Miami, Cook made a motion for the NCSL’s task force on state and local taxes to recommend that NCSL’s budget and finance committee rethink its position. Macco seconded the motion, which was passed 12 to 2 with the support of members from high-tax Connecticut and New York—likely to show a willingness to discuss the issue.

In making the motion, Cook said he recognized that the deduction was important to some states, but that the group, which consists of state lawmakers from across the country, isn’t unanimous on the issue.

Members told Bloomberg Tax that the group wasn’t at all likely to change its position, but that they encouraged debate of issues.

Congressional Bills

The Senate Finance Committee’s tax plan jettisons the whole federal deduction for state and local taxes for individuals. The committee approved its updated plan late Nov. 16 by a party-line vote, shortly after a manager’s amendment was introduced by the panel’s chairman Sen. Orrin G. Hatch (R-Utah) near the end of the hearing. More changes to the Senate plan are likely coming after the Thanksgiving recess. The measure isn’t yet in legislative language.

Under the House bill ( H.R. 1), individuals could claim the deduction for property taxes up to $10,000 a year. Currently, the federal code allows people to deduct the cost of sales, income, and property taxes paid to state and local governments.

Elimination of deductions is a way for the federal government to broaden the base of what is subject to tax and raise revenue to pay for cuts in individual and corporate rates, features of both Senate and House plans. Democratic and Republican members from higher tax states, such as California, Connecticut, New Jersey, and New York, are pressing to preserve the deduction in some form.

NCSL’s position in favor of keeping the full state and local tax deduction is explained in a Nov. 16 letter it sent to members of Congress.

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

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bloombergtax.com

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State