Congressman Reed says SALT won't go away, but urges Cuomo to lower state taxes

Oct 31, 2017

Congressman Tom Reed, a New York Republican who sits on the House Ways and Means Committee, joined House Majority Leader Kevin McCarthy on Tuesday to send a message to the governors of New York and California: we'll do our part to lower taxes and if you're willing to do the same, we'll work with you.


Reed and McCarthy, who is from California, co-hosted a conference call days after the governors of their respective home states, Andrew Cuomo and Jerry Brown, held their own conference call to blast a Republican tax reform plan.

Congressman Tom Reed (R, NY-23) represents the Southern Tier in Western New York.
Credit WBFO file photo

Reed quashed concerns that the state and local tax deduction, or SALT, would be eliminated from the GOP plan. 

"I think that shows a demonstration by our leadership and powers-to-be that we recognize that this issue needs to be resolved," Reed said. "It needs to be compromised because we represent millions of folks in the relative districts and the relative areas that could be adversely impacted by that."

The House Ways and Means Committee, Reed suggested, are leaning towards a plan that would let property owners claims their taxes as a deduction. He's open to that or a tax credit.

In their own conference call four days prior, Cuomo likened the Republican tax reform plan to a game of three card monte. He also suggested the GOP bill punishes Democratic-leaning states including New York.

"This is just the most cynical version of their politics, which is politics of division," Cuomo said. "They tried to divide this country using the issue of immigration. They tried to divide it by race, by religion and now they're dividing it by geography. The states that they happen to be taking from are coincidentally, primarily Democratic ones and I don't think that's an actual coincidence.

"They are trying to expedite the vote, if the states that are affected, if their congressional delegations actually acted in the interest of their state and their district, this would fail." 

The House Majority Leader and Reed both took subtle jabs at their respective governors during Tuesday morning's conference call.

"I have to admit to you, I was happy to hear about the governors' newfound concerns for ridiculous high tax burdens that we have for our constituents in California and New York," said McCarthy.  

But he then issued a challenge to both Cuomo and Brown: lower your state taxes and we'll work with you.

"Let's all work together to lower the tax burden," McCarthy said. "We're going to lower federal tax rates, so I call on Governor Brown, Governor Cuomo and governor's across America to lower taxes in their states as well. There's no reason tax reform shouldn't be a federal and state project. And if you work to lower the tax rates in your state, I promise I'll work with you and stand with you to get that done."

Reed says he and his fellow Republicans are working to put people back to work and he spoke of the current rate by which the economy is growing. It's a rate he says many didn't think could happen but, under the Trump Administration, is.

"Look what happened, even with two major hurricanes," said Reed. "If you couple that growth with the opportunity that tax reform represents by allowing people to keep more of their money, invest in the things they want to invest in, buy those things they want to buy for their families, to grow their businesses and expand their businesses, that to me is a win for all Americans."

Governor Cuomo, on Tuesday, sent a letter to President Trump urging intervention in what he insists is a politically biased tax reform plan. Cuomo's letter reads as follows:

Dear President Trump,

I write to you on an issue that impacts every single American: pending federal tax legislation. I am not writing as a Democratic Governor to a Republican President, but rather as one New Yorker who cares about New York and the country to another. I often say to the New York State legislature, "we are Democrats and we are Republicans, but we are New Yorkers first."

As you well know, the House is expected to release additional details of a "tax cut" plan this week that in reality amounts to a "tax increase" plan for states like New York. The current proposal primarily uses New York and California as the piggybank to make it possible to cut taxes for other states. By eliminating or rolling back state and local tax deductibility, Washington is sending a death blow to New York's middle class families and our economy.

I understand the politics at play here. California and New York are "blue states." I also understand that the political map dictates that most Republican members of Congress come from outside the Northeast and West Coast and their primary motivation is to help their states at any cost, even when it comes at the cost of middle class New Yorkers. But when the economies of New York and California suffer, and they will, the nation follows. 

It's clear this is a hostile political act aimed at the economic heart of New York with no basis on the merits. First, it is an illegal and unconstitutional double taxation that forces our middle class families to subsidize a tax cut for the rest of the nation, and it is contrary to every principle the Republican Party has always espoused. Second, it reverses all the bipartisan progress New York State has made in lowering taxes over these past few years. While we have lowered state income taxes, capped property taxes and are forcing local governments to consider shared services, this federal act would erase all those gains and in fact increase taxes. Eliminating state and local deductibility will result in a tax increase of $5,660 on average for one in three taxpayers in New York, or 3.3 million New Yorkers.

This backward tax plan has encountered much deserved resistance, including from Republicans in the Senate. Senate Finance Chairman Orrin Hatch said "I don't think that's going to go anywhere," adding that state and local tax deductibility is "a system that's worked very well." In the face of this pushback, Republican leadership is now trying to salvage their tax plan with a so-called "compromise." Their scheme is to allow a property tax deduction, but do away with the deduction for state income taxes. For middle class New York families, the average tax increase attributable to losing that deduction would be $1,715.  And considering the original federal proposal would cost New York State taxpayers $18.6 billion, this "compromise" does little to help our state since it would still cost New York State taxpayers nearly $15 billion.

 

Another "compromise" that is being suggested, where only higher income individuals would lose the state and local deductibility, is a 3-card Monte game that could be played on 42nd Street in Manhattan. New Yorkers are not stupid. We know that if deductibility is eliminated on higher incomes it will have a ripple effect, forcing these New Yorkers to move out of the state, taking their tax revenue with them, thus increasing taxes on everyone else. New York will not be in a position to cut state taxes because both the original proposal, as well as the proposed compromise, will force the highest taxpayers from the state and deplete our revenue stream. As you know, five percent of New York State taxpayers account for nearly two thirds of our annual income tax revenue.

I understand why Paul Ryan would seek to hurt New York, but to ask New York Republican members of Congress to vote to raise taxes on their constituents is a betrayal against their state and their constituents. In fact, seven of nine Republicans from New York are against it. The two representatives who support it—Congressmen Collins and Reed—are the Benedict Arnolds of their time because they are putting their own political benefit above the best interests of their constituents.

Speaker Ryan's only justification is that other states subsidize New York. He is just wrong. They don't. The opposite is true. New York subsidizes every other state in the nation. We are the highest donor state which means we send $48 billion more in tax dollars to the federal government than we receive back in federal spending.

To be fair, this is not a new idea to pillage New York and California and send their wealth to other states. Congress tried it under President Reagan, but the gross injustice of it caused all but the most partisan and callous officials to drop support. Today's proposals are no different. Our Congressional representatives should be saying it's time New Yorkers get their money back. Instead, the current proposal would be taking even more revenue from the number one donor state. How unfair.

There is no middle ground here. Any of the proposed "compromises" will still destroy New York's economy and harm the middle class. There can be no elimination, no "compromise," and no cap on state and local tax deductibility.

 

New York needs your help.  You can stop this. And you should not just as an American, but as a New Yorker.

Sincerely,

Governor Andrew M. Cuomo