The Republican challenge
Especially considering those with prominent Republican Senate presence, the picture is far from clear on maintaining this aspect of the ‘Trump tax tract’ (with the tract of course meaning a very large area of indefinite extent… which this week’s tax ‘proposal’ most definitely is on the sheer outline lacking details.)
As a brief rundown on those states is Idaho (2 Senators), Montana (1), Iowa (2 including senior Senator Grassley), Missouri (1), Arkansas (2), Louisiana (2), Kentucky (2 including Senate Majority Leader McConnell), Tennessee (2), Georgia (2), South Carolina (2 including the estimable Lindsey Graham and Tim Scott), North Carolina (2), West Virginia (1) and, Maine (1.)
Let’s see, that’s 21 and does not include 1 Wisconsin Republican Senator in the person of Ron Johnson. He only managed a come-from-behind victory in 2016 that helped deliver the White House to Donald Trump, along with help from Wisconsin Speaker of the House Paul Ryan. And there are also the 2 Nebraska Republican Senators, Ben Sasse and Deb Fischer, the latter of whom are up for reelection in 2018. Are we to actually believe no more than two of these folks are going to object to this provision?
That would be astounding, and any more than two of them refusing to vote for the reform package due to this provision would eliminate the ability of the Republicans to pass it on their own with 50 Senate votes. That is possible due to the rule that Vice President Pence is also the President of the Senate, and can cast tie-breaking votes when necessary.
SO the inclusion of the elimination of state and local income tax deduction from federal taxes may like be nothing more than a reasonably cynical negotiating tactic. We say ‘reasonably’ because in the early phase of any negotiation it is reasonable for one side to throw in a ‘straw man’ (i.e. easily knocked down) or two. Those are points which it will be willing to cede later in order to claim they have given up something as part of a ‘compromise’; which is then of course not really a compromise at all, but only allowing the elimination of something they were not expecting to get in the first place.
Do it without Democrats?
And yet, the Republicans claim that in spite of their very narrow Senate majority they can pass the reform program into legislation along narrow party lines: in other words without any help from any Democrats at all. That sounds both like the specious claim they made on health insurance reform and is even more so the case on tax reform where the winners and losers will be that much more transparent. As noted above, does the Republican leadership really believe they can count on no more than two of their own demurring from voting for tax reform if it includes this elimination of state and local tax deductibility in the initial outline? For each Republican Senator who refuses to go along with that, they need one more Democrat to cross the aisle and vote with them.
Then there is the obvious resistance the Democrats will put up to block that provision, especially considering both the major states it affects along with the broad range of other states also impacted. At the high end of state income tax levels are roughly 9.0%-13.0% in New York, California, Minnesota and Oregon (not even counting city sales taxes and income taxes in places like New York City’s 3.6%-3.9% levy.) And the range of additional Senate Democrat states includes roughly ten other states with income tax rates in at least that 6.0% zone.
This is where far more diligent and effective Democratic Party discipline comes into play from the top down. Even if there was any Democratic Senator who felt that philosophically or practically this elimination of lower jurisdiction income taxes should not be deductible, there would be an appeal from the Democratic Party leadership to not vote against the interest of so many of its most populous and prominent states.
And when we say ‘appeal’ we actually mean apply extensive electoral and financial ‘leverage’, and essentially threaten to ‘drop the hammer’ on anyone who agrees to cooperate with the Trump administration and Republican Congress; especially on this issue. This obviously comes in two forms.
The first is the lack of any election campaign support from senior party leaders at campaign events. And while the Democrats are having trouble raising as much as Republicans at present, there is also the threat of refusing to provide essential financial support during the next election campaign.