When the House GOP released a plan last month that eliminated a popular tax break, some Republican representatives from high tax states like New York, New Jersey and Pennsylvania were outraged.
Republicans from California quietly voiced concerns about the end of a tax break that 1 in 3 Californians use.
Then the East Coast Republicans voted against moving forward on a tax overhaul bill, while the California members went along with House leadership and voted with the majority to move ahead.
The Republicans who pushed back on the demise of the tax break got some of what they wanted in the latest GOP plan — a compromise that’s good for people in East Coast states with high property taxes. In California, which has the highest state income tax rate in the country, but among the lowest personal property tax rates, the concession doesn’t help as much.
The compromise still eliminates most of the break that lets taxpayers deduct state and local taxes from their federal taxes. However, the deal allows taxpayers to continue to deduct up to $10,000 in personal property taxes.
California’s Republicans weren’t involved in the talks that led to the deal, said Rep. Tom MacArthur (R-N.J.), one of the most vocal negotiators. “They have been quiet,” he said.
It’s not clear why Californians haven’t teamed up with their Republican colleagues, especially as Democrats pursue nine of the 14 California districts held by the GOP. In addition to the loss of the state and local tax deduction, the plan’s lower cap on the mortgage interest deduction is likely to have an outsized effect in the state, where homes are more expensive. Many of the people who take advantage of the deductions at risk live along the coast, including constituents of several Southern California Republicans.
The first major sign of resistance came from Rep. Darrell Issa on Tuesday, when he said the bill doesn't do enough for individuals and he’ll vote against it unless changes are made, though he didn't specify the alterations he is demanding. The Vista Republican did point out the elimination of the state and local deduction, saying it’s being used to pay for unnecessary tax cuts elsewhere.
“They say the average person is going to get a reduction and yet many, many people in my district are going to see a tax increase because we have wanted to give tax reductions over and above those that stimulate the economy,” he said.
Other California Republicans may be keeping their concerns private because of their allegiance to House Majority Leader Kevin McCarthy of Bakersfield. A major fundraiser and strong proponent of the tax plan, McCarthy has kept the state delegation united on unexpected issues before, including the House GOP healthcare bill in May.
“I expect all, or nearly all, of them to support the measure regardless of the deductibility of state and local taxes,” said former California Republican Party Chairman Ron Nehring. “That is a tribute to Kevin McCarthy’s skill and influence.”
In a statement, McCarthy said California's Republicans have helped plan the House bill from the start.
McCarthy gives them a direct line to House leadership, said longtime California Republican campaign strategist Rob Stutzman.
“They don’t need to be pushing back publicly in order to be heard,” he said.
Some of the vulnerable Southern California Republicans seem to be making a calculation that tax reform as a whole will be worth the blowback from their constituents over the loss of tax breaks. Congress hasn't passed a major tax overhaul in 30 years, and Republicans feel they need a big legislative win before the year is up.
“They are very cognizant this is a very sensitive time to be supportive of leadership and not appear that the bill is losing momentum — it's a tough spot,” Stutzman said.
Party supporters are also pressuring the Republicans to stick with House leadership.
American Action Network, a political action committee affiliated with House Speaker Paul Ryan, has spent millions peppering areas such as Rep. Steve Knight’s district with radio and television ads urging the representatives to support tax reform.
Knight (R-Palmdale) initially grumbled about the state and local tax deduction elimination, but said most of his concerns have been addressed.
“We’re still chatting, but yeah, I think a lot of them have been,” he said.
Some Republican members who voted for the healthcare bill said they expected the Senate to make changes, and they seem to have similar hopes now.
“To be on record to take away [the] mortgage deduction or essentially raise the federal tax is a tough vote for any member to take,” Stutzman said. “It doesn’t make sense on paper, but I just think there is a widely held belief this isn’t what’s going to be brought to the floor.”
The bill is scheduled to come up for a vote before Thanksgiving, with the Senate planning to take it up soon after. Republicans can’t lose more than 22 votes and pass the bill without Democratic support, so California GOP defections would make passage difficult.
One lobbyist who is working on the tax bill and requested anonymity to speak freely believes the California Republicans are torn between supporting leadership and angering constituents ahead of next year’s midterm elections.
“They’re getting nervous,” said the lobbyist, who described lawmakers’ thinking as, “Do I need this?... Do I need to push these people away right now?”
Democrats are gearing up to use the tax plan, and the elimination of the deductions, against the GOP in the 2018 campaign.