As U.S. House GOP gets ready to talk taxes, Pa. Dems lobby to keep local deductions

Republicans in Congress are gearing up to overhaul the nation’s tax code — promising a simpler law that expands the economy.

Just before House Republicans plan to introduce draft legislation, leading Democrats in Pennsylvania raised concerns about one kind of deduction — used by more than half of all taxpayers in the state — that’s on the chopping block.

The state and local tax, or SALT, deductions allow taxpayers to deduct part of what they pay locally — in property, income or sales tax — from their taxable income.

The Republican Party’s tax framework proposes getting rid this and other deductions, which would bring in more money for the federal government. U.S. Sen. Pat Toomey and other Pennsylvania Republicans say increasing the standard deduction to $12,000 would offset any harm to middle-class taxpayers.

But, U.S. Sen. Bob Casey, D-Pennsylvania, said that would hurt a lot of people he represents.

“According to the IRS, in 2014, 52 percent of Pennsylvanians claimed the state and local deduction,” Casey said.

Right-leaning groups and lawmakers from rural, low-tax areas criticize SALT, saying it primarily benefits those with higher incomes in regions with high taxes. According to the group Tax Foundation, six states — including Pennsylvania and New Jersey — retain half of the country’s benefit from the deductions.

Several Republicans in New Jersey voted against a budget resolution earlier this month to punctuate their displeasure about losing SALT. Pennsylvania Gov. Tom Wolf and other Democrats criticize it in the context of the Republican tax plan as a whole, which also lowers corporate taxes and reduces taxes on the highest-earning individuals. Ending SALT deductions is one way to bring more money into the federal government to make up for that lost revenue.

“Gutting the state and local tax deduction is a tax increase on the middle class, pure and simple,” said Wolf, of shifting that burden.

The deduction is just one part of the Republican framework — and how it will balance out with other changes is not yet clear. House Republicans say they will introduce draft legislation with more details this week, and some compromises over SALT — including preserving a property tax deduction — are already on the table.

Thanks to a resolution passed earlier this year, Republicans need only a simple majority to pass tax legislation — effectively shutting Democrats out of the process.