GOP Tax Plan: Hudson Valley's Winners And Losers

House Republicans briefed lawmakers Thursday on their plan to overhaul the tax code, the first rewrite of tax laws in a generation, and cut taxes by $1.51 trillion. The plan, to be formally rolled out later, preserves pre-tax contributions of up to $18,000 to 401(k) retirement plans, a key savings vehicle for many middle-income Americans, and also reduces the number of tax brackets, slashes corporate tax rates and sharply reduces a cherished deduction for mortgage interest — something that could greatly affect the tax bills of high-value real estate areas like the Hudson Valley.

A summary of the plan released Thursday follows months of internal debate, delays and conflict. It is far from a final product, and lobbyists are already lining up in opposition to some of the key provisions, including limits on the amount of mortgage interest homeowners can deduct and a sharp reduction in the corporate tax rate some conservatives argue could mean more overseas outsourcing of American jobs.

One of the things that will hit Hudson Valley residents the hardest is a proposed limit on the deduction of local property taxes to $10,000, known as the SALT deduction. The deduction for state income taxes would be eliminated, which generated significant opposition from Republicans in high-tax states such as New York, New Jersey and Connecticut.

“Slashing the state and local tax deduction is a nonstarter," said Rep. Nita Lowey (D-17). "I support efforts to make the tax code fairer and to put more money in the pockets of hardworking Americans, but this proposal would have the opposite effect for many of my constituents. I hope Republicans invite Democrats into the tax reform process and begin working with us on reforms that will grow the economy, create jobs, and improve the financial security of New Yorkers. This bill falls far short of these goals and of the Republicans’ own promise to help working families.”

Elimination of the deduction for state income taxes is the one thing that concerns Rep. John Faso (R-19). However, overall he supports the plan.

"In the 19th Congressional District, approximately 32% of tax filers itemize deductions, typically for mortgage interest, charitable donations and state and local taxes," he said. "With the doubling of the standard deduction for married couples to $24,000, I expect a reduction in the number of taxpayers who chose to itemize deductions if this plan was adopted."

The plan increases the child tax credit from $1,o00 to $1,600, but repeals the $4,050 per child exemption. It also adds a $300 credit for parent and non-child dependents.

"These changes will save families money," Faso said.

The plan to limit the deduction on mortgage interest for purchased homes at up to $500,000, while the current limit is $1 million, is a threat to Hudson Valley homeowners.

The National Association of Realtors is lobbying against that provision, warning in ads that could mean a tax increase for middle-class homeowners.

Jerry Howard, chief executive of the National Association of Homebuilders, told the New York Times the provision limiting mortgage interest deduction could create a recession in the housing market, and picks "rich Americans and corporations over small businesses and the middle class."

"It puts such severe limitations on home buyers' ability to use the mortgage interest deduction that home values will fall," he said. "If a home seller takes a loss, that's money they were counting on for retirement."

Also seen as a benefit to the wealthy is a provision that would immediately double exemption for inheritance taxes and repeal the tax after six years.

Plus, the Clinton-era 39.6 percent income tax rate for the wealthiest Americans was retained, but a minimum level of income to qualify for the bracket increases to $1 million for couples or families from the current $470,000, which would reduce tax revenue. The brackets announced Thursday are:

• 12 percent: Individuals earning up to $45,000 and married couples earning up to $90,000 would file in this bracket.
• 25 percent: Individuals earning up to $200,000 and married couples earning up to $260,000 would fall in this bracket.
• 35 percent: Individuals earning up to $500,000 and married couples earning up to $1 million would fall in this bracket.
• A fourth bracket is yet to be determined.

In response, a group of wealthy Americans called the Patriotic Millionaires officially launched their Taxpayer Action Center for taxpayers to learn about the issues and take action.

"When millionaires get a tax cut, the middle class will pay," said Morris Pearl, Chair of the Patriotic Millionaires and a former BlackRock executive. "Speaker Paul Ryan and President Trump like to pretend this is some kind of economic philosophy. It is not. It's a payoff to their millionaire friends and to Republican campaign contributors. Trickle down has never worked, it will never work, and it is embarrassing to the country that lawmakers continue to spread lies about the economic effects of their tax policies."

Among the details released Thursday:

• The number of tax brackets would be reduced from seven to three or four with rates of 12 percent, 25 percent, 35 percent and a category that is yet to be determined. Most people would be able to file their taxes on a postcard-sized form under the simplified tax system outlined in the plan, Republicans said.
• The standard deduction used by most average Americans would nearly double — $12,000 for individuals and $24,000 for families.
• Deductions for medical expenses are eliminated in the plan, which Republicans said would be offset by an overall lowering of tax rates.

Though many local Republicans are against the bill, some critics see the GOP's support of Trump's other policies as a reason why this bill is even being considered.

“We welcome efforts to simplify the federal tax code, expand beneficial tax credits, and lower tax rates for middle class and low income Americans," said Matt Zone, president of the National League of Cities. "But, as city leaders, we see this bill as yet another attempt to limit local control and pass the cost of action in Washington onto city halls throughout the nation."

In a statement, Trump said:

"We are just getting started, and there is much work left to do. The special interests will distort the facts, the lobbyists will try to save their special deals, and some in the media will unfairly report on our efforts. But my administration will work tirelessly to make good on our promise to the working people who built our nation and deliver historic tax cuts and reforms — the rocket fuel our economy needs to soar higher than ever before."

Rich Scinto, Beth Dalbey and The Associated Press contributed to this report.

Photo: AP/Evan Vucci

SEE ALSO: Ending Your Deduction For State, Local Taxes: Hudson Valley Delegation Weighs In