Tag: GOP tax cut for the rich

The following article by Alexander Burns was posted on the New York Times website November 5, 2017:

WEST CALDWELL, N.J. — Steve Schwartz looks like a voter who might swoon for the Republican tax plan, unveiled last week in Washington. He is a political independent who owns a company that makes windshield wipers, he describes himself as leaning “right on fiscal matters,” and he said he would benefit from the elimination or scaling-back of the estate tax.

But Mr. Schwartz, 72, said he is deeply wary of the House bill. “I’m not happy,” he said, “if they take away New Jersey’s deductions.”

In the dense suburbs of northern New Jersey, where property values are high and local taxes keep climbing, Mr. Schwartz has ample company in his unease. It is in places like West Caldwell, in New Jersey’s 11th Congressional District, where Republicans are facing the most furious internal resistance in their drive to overhauling the tax code — and the greatest political risks if they succeed.

Indeed, Republican proposals to raise revenue by targeting high-tax states dominated by Democrats could endanger Republicans in districts like this one, particularly in states like New Jersey, New York and California, perhaps putting the party’s majority in Congress in peril.

The 11th District, a Republican-leaning hodgepodge of quaintly verdant residential streets, snarling highways and big-box shopping centers, groans under an extraordinary tax burden. To voters here, a range of federal tax write-offs are nearly sacrosanct, none more so than deductions for state and local taxes. The House tax bill would undo or sharply limit all of them.

Representative Lee M. Zeldin of New York, a Republican from a similar district on Long Island, said it would be impossible for him to vote for the bill in its current form. Mr. Zeldin said he would favor a “big, beautiful tax cut,” but not one that took aim so directly at blue-state taxpayers.

“I view it as a geographic redistribution of wealth,” Mr. Zeldin said. “You’re taking more money from a state like New York, to pay for a deeper tax cut elsewhere.”

The potential backlash for suburban Republicans is significant. While the party’s base is mainly rural and culturally conservative, a small group of solidly Democratic states with complex local tax codes could, in theory, nearly cost Republicans control of the House. In New Jersey alone, there are as many as five Republican-held districts where the tax plan is likely to be unpopular; add in those in New York and California and the number approaches 20. To gain a majority, Democrats must take two dozen seats away from the G.O.P., and they have already been hungrily eyeing the educated suburbs where President Trump is unpopular.

The tax bill, pushed by Speaker Paul D. Ryan and Representative Kevin Brady of Texas, the House’s chief tax writer, would cut tax rates for many individuals and businesses, but would void or sharply limit a range of popular deductions. Of particular concern in New Jersey are proposals to put a cap of $10,000 on the property taxes that can be deducted at the federal level; to eliminate the deduction for state and local income taxes; and to restrict the mortgage interest deduction to loans of $500,000 or less.

The changes to deductions would raise more than $1 trillion in additional revenue over 10 years, to help offset the $2 trillion cost of lowering tax rates and doubling the standard deduction.

Nationwide, about one-fifth of all taxpayers claim the state and local tax deduction, according to the Pew Charitable Trusts, but the proportion is much higher in New Jersey, where more than one-third claim the deduction, with an average of about $11,000 a year. In value terms, two states — California and New York — account for nearly one-third of the total claimed nationwide.

The House Ways and Means Committee will begin considering and amending the bill on Monday, with the goal of passing it out to the House floor by the end of the week. The Senate is expected to introduce its own version of the bill in a few days.

Most Republicans from New Jersey and New York have opposed the legislation in its earliest drafts, forcing congressional leaders to advance it with the narrowest of majority votes. Republican leaders in both states’ legislatures denounced the bill, and Kim Guadagno, the Republican nominee for governor of New Jersey, said in an interview that she would push the state’s congressional delegation to “condemn it.”

Jon M. Bramnick, the Republican leader in the New Jersey State Assembly, said the party’s polling consistently found taxes to be a singular and overwhelming issue for voters. The state’s members of Congress, he said, had to fight fiercely for its fiscal interests.

“When you represent New Jersey, it’s extremely important to stand up for New Jersey,” said Mr. Bramnick.

In California, another state likely to be hit especially hard by the tax proposals, Republicans have been more supportive of the House bill, a dynamic that lawmakers attribute to the influence of Representative Kevin McCarthy, a California Republican who is the House majority leader.

But key blue-state Republicans face an agonizing balancing act, weighing their ambition to deliver broad tax cuts with the narrower interests of their districts. Where most Republicans take it as an article of faith that passing a tax bill would buoy the party in 2018, lawmakers in these areas worry that a law burdening the suburbs would doom them.

In New Jersey’s 11th District, Representative Rodney Frelinghuysen already figured to face a stiff challenge in 2018 before the vote to approve consideration of the tax legislation, an important procedural step. He was one of few Republicans from the Northeast to vote in favor, and the only one from New Jersey. His vote did not sit well in his district, an affluent and well-educated area where the average household income is more than $100,000 a year.

Outside her office in a development of high-end stores and condos in Livingston, N.J., Vicki Stout, 55, said she had voted for Mr. Frelinghuysen in the past, but might reconsider her support. Ms. Stout, a real estate agent who is not registered with a political party, said the tax bill would both snarl her own taxes and deter potential clients from purchasing homes.

“It’s going to have people move out of the state, if it passes,” Ms. Stout said of the bill. “It makes absolutely no sense.”

Even voters who may support the legislation over all acknowledge that it will come at a cost to the district — and to them personally. Joe Giannotti, a contractor, estimated that he would pay several thousand dollars more in taxes if he lost the deductions that are currently under the knife.

But Mr. Giannotti, who said he usually votes Republican and supports President Trump, said it would be worth it.

“It would hurt this area, but it’s important for the good of the country,” Mr. Giannotti said, arguing that New Jersey Democrats should respond by cutting local taxes: “Let’s get the Democrats to get their policies in line.”

An aide to Mr. Frelinghuysen did not respond to a request for an interview. But Mr. Frelinghuysen, who chairs the powerful Appropriations Committee, has emerged as something of a bellwether figure in New Jersey. Though he is viewed locally as a moderate, Mr. Frelinghuysen has taken a series of perilous votes to back the agenda of Republican leaders, supporting both the tax plan and an unpopular bill to repeal the Affordable Care Act.

Mr. Frelinghuysen, who has served in Congress since 1994, is facing his first concerted challenge in years after his district split almost evenly between Hillary Clinton and Mr. Trump in 2016. Democratic Party polling has found the tax issue to be a potent one in districts like his, with voters inclined to view it as a giveaway to the extremely wealthy, according to a strategist who advises House Democrats and was briefed on the polling.

Mikie Sherrill, a lawyer and former helicopter pilot who has emerged as the most formidable of Mr. Frelinghuysen’s potential Democratic opponents, quickly seized on the tax plan to brand the incumbent as out of touch.

Describing the bill as a “gut punch” to the district, Ms. Sherrill stressed that New Jersey taxpayers would not benefit from the legislation in the same way as people in redder states, where local tax deductions are less valuable.

“I don’t think we are going to feel it here in New Jersey as a tax-cut bill,” she said of the House plan. “Being middle class in New Jersey is a little different from being middle class elsewhere, like Alabama.”

That sense of regional grievance crosses party lines, with both Republicans and Democrats in prosperous coastal areas venting frustration at the possibility that their tax burden may rise as rates fall for corporations and taxpayers in redder states. Mr. Zeldin said that would exacerbate the existing indignity that New Yorkers pay more money in federal taxes than the state gets back from Washington.

Representative Peter T. King of New York, a Republican whose district neighbors Mr. Zeldin’s, said suburban voters would punish Republicans if the current bill becomes law. He said lawmakers had appealed to members of the Trump administration who hail from the area, like Treasury Secretary Steven Mnuchin and Gary Cohn, the president’s top economic adviser, but so far to little avail.

“Maybe it’ll strengthen them in other parts of the country, but it’s going to create very real and justifiable political issues in New York and New Jersey,” Mr. King said of Republican candidates. “You’re talking about restructuring a large part of the economy of the Northeast.”

Correction: November 6, 2017 
An earlier version of this article misstated the 2016 presidential election results in Mr. Frelinghuysen’s district. The district split almost evenly between Hillary Clinton and Donald Trump, slightly favoring Mr. Trump. It is not the case that Mrs. Clinton won the district.

View the post here.