State Tax Break Cap Could Sap $1 Trillion From GOP Plan, Study Says

A $400,000 income cap on state and local income tax deductions would punch a revenue hole of more than $1 trillion in the tax framework released by the White House and GOP lawmakers, according to an estimate by the Tax Foundation, a conservative-leaning Washington policy group.

Limiting the use of the deduction to people with adjusted gross incomes below $400,000 -- a cap that has drawn support from New York Representative Peter King and New Jersey Representative Tom MacArthur -- would raise just $450 billion over a decade, compared to $1.8 trillion if the deduction were fully repealed, said Kyle Pomerleau, director of federal projects at the Tax Foundation.

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Estimates vary on how much revenue tax-writers could generate by eliminating the deduction. Another group, the Tax Policy Center, has said it’s $1.3 trillion. Either way, capping the deduction as King suggests would complicate lawmakers’ efforts to offset tax rate cuts they’ve proposed.

House Ways and Means Chair Kevin Brady said Thursday that no decisions had been made on what to do with the tax break and that leaders are still considering various ideas.

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