ATLANTA -- A popular deduction targeted to end in the GOP's overhaul of the tax code is claimed by more than a quarter of all filers in a majority of states, including many led by Republicans where some residents eventually stand to see their federal tax bills rise.
The exact effect in every state isn't known, in part because of differences in the Senate and House versions of the bill. But eliminating the deduction for state and local taxes stands to alter the bottom lines for millions of taxpayers who itemize.
Residents in high-tax, Democratic-led states stand to be the hardest-hit if the measure prevails. But some filers also could be left paying more in traditional Republican states.
In Arkansas, a little more than one-fifth of federal individual income tax filers claimed a deduction for state and local taxes in 2015. The deduction averaged $9,116 per filer.
In Georgia and Utah, about a third of taxpayers claim the deduction.
"It's a bad deal for middle-class families and for most Georgians," said Georgia state Rep. Bob Trammell, leader of the House Democrats. He said Republicans want to eliminate the state and local tax deduction to help pay for tax cuts for businesses and the wealthy.
How many winners and losers are in each state depends in large part on an aspect of the Republican tax overhaul that would nearly double the standard deduction -- to about $12,000 for individuals and about $24,000 for married couples.
Republicans say most tax filers would see a net benefit from that provision.
The Tax Policy Center, run by the Urban Institute and Brookings Institution, has estimated that the number of people who itemize deductions would drop by three-quarters if the provision prevails. Some of those taxpayers could see a bigger deduction under the Republican plan.
"Based on what I have seen, it might actually help some Georgians" to replace the state-and-local tax break with a higher standard deduction, said Georgia state Rep. Terry England, the Republican chairman of the House Appropriations Committee.
Yet estimates by the Tax Policy Center and a nonpartisan congressional analysis say some taxpayers eventually will end up owing more in federal taxes under the GOP plans.
The left-leaning Institute on Taxation and Economic Policy said changes to the state and local tax deduction under the House bill would contribute to one of every five taxpayers in the hardest-hit states getting a higher tax bill. While most of those states are led by Democrats, Republican-led Georgia and Utah and the swing state of Virginia are among them.
Democratic lawmakers said any initial tax relief felt by the middle class or working-class families will eventually disappear. In Georgia, for example, an estimated 9 percent of filers would pay higher taxes in 2018, rising to 22 percent by 2027, according to an analysis by the Institute on Taxation and Economic Policy.
Most tax filers currently take the standard federal deduction of $6,300 per individual or $12,600 for married couples. But some reap larger tax breaks by itemizing deductions for state and local taxes, medical expenses, charitable contributions and interest paid on home mortgages.
The state and local tax break is the largest of those. About 44 million taxpayers claimed deductions totaling around $550 billion for state and local taxes paid in 2015, according to the most recent Internal Revenue Service data.
The top 10 states with the highest average state and local tax deduction all voted for Democrat Hillary Clinton in last year's election. New York led the way with an average per-person state and local tax deduction of more than $22,000, followed by Connecticut, California, New Jersey and Massachusetts.
But when analyzed by the percentage of taxpayers claiming the deduction, several states won by President Donald Trump rank in the top third nationally. In reliably Republican Utah, 35 percent of taxpayers claimed the deduction for state and local taxes. That figure was 33 percent in Georgia and 31 percent in Wisconsin. Thirty-five states had at least one-quarter of their taxpayers claim the deduction.
Senate Republican leaders, who are seeking a major legislative victory before year's end, hope to get their tax bill, which differs significantly from the House measure, to a vote after Thanksgiving. But it is unclear whether it has enough support to pass in the narrowly divided chamber.
The state and local tax deduction is just one of many provisions targeted for change under legislation that passed in the House last week. The House version would repeal the deduction for income and sales taxes while capping the property tax deduction at $10,000. The Senate bill would end deductions for all state and local taxes.
Because of the proposal's widespread effect, debate over curtailing the deduction already is creeping into competitive 2018 elections.
Democratic U.S. Sen. Tammy Baldwin of Wisconsin has warned that repealing the deduction could lead to a tax increase for many state residents.
The left-leaning Wisconsin Budget Project has estimated that the Senate plan overall eventually would leave nearly 300,000 Wisconsin residents paying higher federal income taxes. Baldwin said the plan will disproportionately benefit corporations and the wealthiest Americans.
"That's not right, and it's not fair," she said during a news conference Friday in Milwaukee.
One of her Republican challengers, state Sen. Leah Vukmir, has signed a letter encouraging the deduction's repeal. Republican Gov. Scott Walker, a tax overhaul supporter who is seeking re-election, has been criticized by the liberal advocacy group One Wisconsin Now. The group says repealing the deduction would have "the net effect of a massive property tax increase for Wisconsin homeowners."
Utah state Sen. Howard Stephenson is a supporter of repealing the state and local tax deduction, even though a comparatively high percentage of residents in that state claim it.
Stephenson, a Republican who is president of the Utah Taxpayers Association, said he believes the deduction generally favors high-tax states to the detriment of states with a lower tax burden, such as his own.
"We don't like paying for the excesses in other states," he said.
Offering concessions to skeptical senators one by one could prove an impossible task for Republican leaders, who face restraints under Senate rules on the total size of the tax cut package.
Republicans, who control Congress and the White House, are seeking their first significant legislative achievement of the Trump presidency.
But the dynamics of the two chambers differ markedly. With the House tax bill, Speaker Paul Ryan of Wisconsin and other Republican leaders employed a command-and-control process and a rocket-speed schedule to minimize Republican dissent. The bill sailed through the House on Thursday along party lines, two weeks after it was introduced.
In the Senate, where the party's margins are much smaller and individual members are more powerful, party leaders will need to win over what could be a half-dozen or more wavering Republicans.
Senate leaders are trying to replicate Ryan's success in the House. They believe that on a core conservative issue, at a time when the party is still searching for a signature legislative victory under Trump, no senator will want to be the one who blocks the bill.
Information for this article was contributed by Christina A. Cassidy, David A. Lieb and Scott Bauer of The Associated Press; and by Jim Tankersley of The New York Times.
A Section on 11/19/2017
Print Headline: Targeted deduction popular across U.S.; In Arkansas, fifth of filers claimed it in ’15