Whether the newly introduced congressional tax bill makes it out of the House of Representatives may very well depend on the votes of California Republicans.
Recall that all 14 California Republican members of Congress voted for the budget bill that barely passed the House last week 216-212. A few Golden State GOP members changing their votes would have sunk the budget resolution.
Now that details of the tax bill have come into focus, the effects on California will be weighed, perhaps changing the votes of some members of the delegation.
California is particularly affected by some of the reforms in the bill announced yesterday. Because housing in the state is so costly, the proposal to cut in half the mortgage interest deduction from $1 million to $500,000 would affect some new homebuyers especially in coastal regions. The high cost of housing and related property taxes calculated on housing prices also plays in the reduction of the property tax write off to be capped at $10,000. Many homeowners would exceed that cap.
Concern has already been expressed by state leaders, including Governor Jerry Brown, that eliminating the deduction for state income taxes in this high tax state will have a profound affect on California’s budget.
Republican supporters of the newly introduced bill argue that tax cuts and other provisions in the bill would offset many of the write-off changes and juice the economy to such an extent that all taxpayers will be better off.
House Majority Leader, Kevin McCarthy, emphasized many of the changes in the law would produce prosperity: lowering individual tax rates; significantly increasing the standard deduction; repealing the Alternative Minimum Tax; lowering corporate tax rates from 35% to 20%; reducing the business tax on small business while making sure that “pass-through” business income is distinguished from individual wage income.
It is noteworthy, however, that staunch conservative Republican representative Tom McClintock told the Sacramento Bee that he would have preferred that the income and property tax deductions and the mortgage interest deduction remained intact. However, he also said he believes the bill as a whole will assist the economy.
The question is: will other California Republicans accept the idea that the economy will flourish under the tax reform or pause before voting yes when the numbers affecting constituents and the state are tabulated?
Congressman Darrell Issa, in an exchange earlier with Governor Brown, indicated he doesn’t accept some of the criticism of the tax reform bill relating to the state and local tax deductions.
The responses by McClintock and Issa are tell-tale signs on where Republicans will go with the tax reform measure. Along with the pressure sure to be applied by Majority Leader McCarthy to seek support from his home delegation to support the bill, odds are California congress members will be on board. However, as the bill works its way through the process, just a handful of defections could be fatal to the tax reform legislation.