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Former Republican Rep. Rick Lazio of New York explained in a recent interview with Business Insider how he would sell the tax reform package outlined by congressional leaders to his constituents – who could be some of the plan’s biggest losers.
The initial plan included the elimination of state and local tax deductions, which disproportionately offer relief to upper-middle class families in New York, California, New Jersey, and other high-tax states. During an interview with Fox News last week, Office of Management and Budget Director Mick Mulvaney said the losers of the plan would be wealthy homeowners in New York and California.
As of Tuesday, however, Republicans were considering putting limits on the deductions, which total $1.3 trillion, instead of eliminating them altogether, Bloomberg reported. Twenty-three Republican congressman hail from New York and California and will be critical votes on passing tax reform.
Though Lazio said he is still waiting to see an actual draft of the legislation, which does not yet exist, he told Business Insider that he is “less concerned about carve-outs for particular purposes and more concerned about how it impacts people in various segments, taking into account the effects on wages and compensation.”
“That’s the way I would be talking to my constituencies,” he continued. “I am at a town hall meeting and somebody would stand up and say ‘I have $11,000 in property taxes and I’m not going to be able to take that deduction,’ and the next thing I’d say would be ‘well, what happens when you take the standard deduction and it doubles and how does that affect your overall taxes based on the amount of money you made last year?'”
“If you had to give up a little bit of something so you had a simpler, fairer tax code, then would you be willing to make that trade off?” he added. “I personally would.”
Lazio, now a senior vice president at Alliantgroup, said it would be impossible to get tax rates down without cutting into the deductions that are currently offered “if you want to be fiscally responsible.”
“So you’ve got to make choices which are not going to be supported by every person,” Lazio, who used to represent New York’s 2nd Congressional District and challenged Hillary Clinton for a Senate seat in 2000, said.
“But I would also say that it’s in the public interest to get rates down in a fair way, get business rates down, obviously pass-through and corporate, and you can’t do that without raising the deficit unless you’re willing to trade some things off and in this case, it’s going to be deductibility, and that’s probably going to affect upper-income people more than people on the other end.”
But Lazio focused in on what he said “the greater good” is with the plan, which would be “getting growth rates up,” leading to higher tax savings.
“You want to look at how you fare overall and not just get ginned up by an outside group that’s trying to defend a provision that’s important to them,” he said.
Lazio admitted that elimination of the deductions could cause an uproar in his district.
“I mean this is not totally satisfactory to a constituency back home but the truth of the matter is … I think the average mortgage interest deduction in my zip code is about $24,000 a return,” he said. “And that’s about more than 10 times what the average mortgage interest deduction is for a filer in Ohio. So, you have to understand that the rest of the country is saying, ‘Why should we underwrite the cost.'”
As to whether New York, California, and New Jersey Republicans will vote for the package, Lazio said they will “need to see the whole package” laid out.
“They are going to need to be armed with the facts and be able to explain to their constituents why, on balance, this is good for them,” he said. “And my guess is that they’re going to work very hard to make sure they have those facts. And I also think that the rhetoric is not matched by the actual legislative text. I look at this as a broad outline of general agreements, directionally where they want this to go. It’s going to take many weeks of legislative drafting.”
One thing Lazio would like to see changed when the framework turns into actual legislative text is the proposal to raise the 10% tax bracket to a 12% bracket. Lazio said all of those filers should stay at 10% and not see their taxes raised.
He added that he does believe the legislation will pass, and predicted it will be on President Donald Trump’s desk in the first quarter of 2018.