5 potential pitfalls for Republican tax overhaul effort | McClatchy Washington Bureau

Even the most cynical and contrarian of House Republicans gave the GOP’s new tax overhaul plans rave reviews, but that party unity isn’t going to last.

In fact, it began to dissolve mere hours after they learned details of the 429-page bill.

Also lurking are the lobbyists and special interests. While Republican leaders dismissed complaints from outside advocates and industry groups, powerful factions will inevitably become too loud to ignore.

Here are five areas where Republican lawmakers, and the groups that are applying pressure, could stand in the way of the GOP accomplishing one of its biggest campaign promises from the 2016 election.

Local interests

For Republicans from high-tax, high-income states, regional concerns were overshadowing political ones.

GOP lawmakers from New York and New Jersey in particular have been telling leaders for weeks that a failure to address their concerns about ending or limiting state and local tax deductions could cause problems. On Thursday, many remained unappeased.

As expected, the legislation unveiled Thursday would eliminate the write-off for state and local income and sales tax deductions. While it would preserve the property tax deduction, it would cap it at $10,000, which some Republicans from New York and New Jersey have said is far too low. In many counties around New York City, the average property tax deduction eclipsed that threshold.

Hours after the measure’s official release, some lawmakers were already saying they’d oppose the bill as it now stands.

“Adding back in the property tax deduction up to $10,000 is progress, but not enough progress,” said Rep. Lee Zeldin, R-N.Y. “If I’m not fighting for New Yorkers, I can’t expect anyone else from another state to do it for me.”

Costs for homeowners

The Republican bill would keep existing mortgage interest deductions, but cap write-offs for new home purchases up to $500,000.

That’s bound to stir controversy in states such as California, where the average home price hovers right around that sum. At her weekly press conference Thursday morning, House Minority Leader Nancy Pelosi appeared alongside fellow California Democrats to pressure the delegation’s Republican members to stand strong against the GOP tax bill, if only for this issue alone.

Influential groups in the home building and real estate sectors were also making it clear they would pressure Republicans to change their plan.

National Association of Home Builders Chairman Granger MacDonald accused the Ways and Means Committee on reneging on a promise to include a NAHB-backed provision that would have provided up to 37 million homeowners with a “robust homeownership tax credit.”

“Eliminating or nullifying the tax incentives for homeownership puts home values and middle class homeowners at risk, and from a cursory examination this legislation appears to do just that,” National Association of Realtors President William E. Brown added.

Child care coverage

Last week, Ivanka Trump came to Capitol Hill and stood alongside House and Senate lawmakers to push to double the child tax credit to $2,000 per child. The House Republican tax bill only extends the tax credit to $1,600.

Sen. Marco Rubio, R-Fla., said Thursday that wasn’t enough, tweeting that a “$600 #ChildTaxCredit increase doesn’t achieve our … goal of helping working families.”

House Ways and Means Committee Chairman Kevin Brady, R-Texas, said there were other elements in the bill to benefit taxpayers with children, such as a $300 break for each parent and non-child dependent, such as a grandparent living in the same household, to help families with various everyday expenses.

But many Republicans have said this measure needs to do everything possible to show voters they care about families, and provisions that could be criticized as falling short could be problematic. At the same time, Republicans who want to spend more on child tax credits could have to fight fiscal hawks who want to spend less on nearly everything.

The bill also would end working parents’ ability to put pre-tax money into employer-offered flexible spending accounts to cover child care costs would be completely eliminated. Kansas Republican Rep. Kevin Yoder had wanted to increase the maximum that could be placed in these accounts from $5,000 to $7,500.

Deficit hawks

Fiscal conservatives have threatened to sink major pieces of legislation that spend too much money or don’t do enough to trim the national debt. But when this tax overhaul is involved, many have said they’re willing to tolerate future deficits as a political price for passing a landmark policy objective.

Not every Republican felt this way. Some GOP lawmakers voted against the budget deal last month that paved the way for the tax overhaul process to begin in earnest, concerned it would set a precedent for ignoring rampant federal spending.

“Passing a budget that doesn’t address out-of-control spending and adds trillions of dollars to the national debt just to achieve some policy goal — which also could be accomplished with a responsible budget — is an endorsement of a warped worldview where the end justifies the means,” the House Liberty Caucus, a small group of libertarian-minded Republicans, said in a statement at the time.

Republican leaders were hopeful a “dynamic scoring” of the tax bill by the nonpartisan Congressional Budget Office, which would factor in revenue generated through projected economic growth resulting from lower taxes, will provide a sunnier outlook.

“I think you’re gonna see tremendous growth,” Brady predicted.

Conservative complaints

As the House’s most conservative lawmakers were digesting the newly-released tax bill Thursday, the most conservative voices off Capitol Hill were also weighing in with suggestions — and digs.

Heritage Action for America CEO Michael Needham said Republicans ought to eliminate the Affordable Care Act penalty on most individuals who don’t buy health insurance, an idea floated by President Donald Trump and some Republican senators earlier this week.

There’s concern that a version of a “border adjustment tax” had been sneaked into the bill. Conservatives defeated efforts to impose a tax on imported goods earlier this year despite leadership wishes, but advocacy groups on Thursday warned that a 10 percent surcharge on imports, or a “backdoor BAT,” might have been included.

“Let’s hope this is just a rumor,” said Tim Phillips, president of Americans for Prosperity, a conservative activist group. “We strongly oppose adding a new tax that would raise prices on everyday goods while disproportionately hurting the poor and middle class.”

Rep. Mark Sanford, R-S.C., told McClatchy Thursday afternoon he also was still looking for answers on whether something “eerily similar” to a “backdoor BAT” had been written into the base GOP tax bill.

Sanford said it was possible that this tax was “a couple hundred billion dollars in scale, whereas the BAT in its original form was more than a multi-trillion,” in which case he might be able to stomach it.

But otherwise, he said, “I would have major problems with it.”