GOP Tax Agenda Conflicts With Their Hopes To Keep Congressional Majorities In 2018

You've probably already seen the new poll from NBC and the Wall Street Journal yesterday. The headline was all about how Señor Trumpanzee's approval ratings had dropped to new lows. Trumpanzee's "job approval rating has declined to the lowest point of his presidency," was what everyone took away who looked at it. More important, at least for me, is that the preference for Democrats to take over Congress as a check on Trump, has continued to increase.

Looking ahead to the 2018 midterm elections, which take place a year from now, 48 percent of registered voters in the poll say they prefer a Democratic-controlled Congress, while 41 percent want a Republican-controlled Congress.

That 7-point advantage for Democrats is up one point from September’s NBC/WSJ poll, but it’s smaller than the double digit margins they enjoyed in the 2006 and 2008 cycles, when they picked up a sizable number of congressional seats.

Still, a near-majority of voters, 46 percent, say their vote in November 2018 will be to send a message for more Democrats to serve as a check and balance to Trump and congressional Republicans.

That’s compared with 28 percent who say their vote will be a message for more Republicans to help Trump and congressional Republicans pass their agenda. Another 22 percent said their vote would be a different message than either of those two choices.

And the Republican advantage in GOP-held congressional districts has decreased from +14 in September (52 percent preferring a GOP-controlled Congress versus 38 percent preferring a Democratic-controlled Congress) to +6 in October (47 percent GOP, 41 percent Dem).

“This is a flashing yellow light for Republicans,” said McInturff, the GOP pollster.

Trump and the GOP are getting killed by independent voters, who have now turned away from the Republicans by big margins. Democrats will largely stick with Democrats and Republicans with Republics-- although turnout and enthusiasm are important factors-- but in most states, it is independents who will determine the outcomes. And they are OVER Trump and over Ryan and his Congress.

Tony Schwartz, the guy who wrote the book that made Trump famous, Art of the Deal tweeted yesterday that "Trump is consummate sociopathic grifter-- expert at deflection, deception, & misdirection. When base finally notices, it will be too late." A few hours later he tweeted that "Trump attacks rise when he feels most endangered. Transmutes his panic into rage in the face of tomorrow's indictment(s) by Mueller & team." He knows Trump better than anyone who writes about him and what he's been writing this year clearly points to a Trump who will continue alienating more and more voters-- for himself and for the Republicans in Congress.

Paul Ryan is a complete mess. He doesn't know how to deal with Trump and he's making it worse for himself and for his caucus. If the report over the weekend in Politico about Republican changes to home deductibility on federal taxes is true, the GOP won;'t be looking at a couple of dozen House seats lost; they'll be looking at a number closer to 100. The GOP plan would cost middle class homeowners thousands of dollars in increased taxes yearly so that Trump and Ryan could give multimillionares and billionaires giant tax breaks? How could anyone think this is a good idea?

The National Association of Home Builders on Saturday accused House Speaker Paul Ryan of abruptly reversing course on a mortgage tax credit proposal and announced it would oppose the tax-reform proposal that GOP lawmakers expect to unveil on Wednesday.

The about-face by the housing-industry lobbying group strips Republicans of a powerful ally. Tax breaks for homeowners have long been one of the flashpoints of any attempt to rewrite the nation's tax laws.

"All the resources we were going to put into supporting are now going to go into opposing the plan," NAHB Chief Executive Officer Jerry Howard told Politico.

Homebuilders and other groups had been working with Ways and Means Chairman Kevin Brady (R-TX) on a plan to preserve tax breaks for homeowners. House Republicans have been planning to weaken the deduction that home mortgage borrowers currently get for the interest they pay on their mortgages by raising the standard deduction, leading much of the housing lobby to line up against the plan.

As an alternative, Brady had agreed to a tax credit that would combine mortgage interest and local property taxes, Howard said.

Friday night, Brady told Howard that that idea had been rejected by House leadership. In a phone call Saturday, Ryan said rank-and-file members weren't comfortable with the concept of a homeownership tax credit, Howard said.

"I don’t think it's fair of the speaker to take a concept that his own committee chair is in favor of and deep-six it without vetting it with the conference," Howard said.

"He told me there wasn’t enough time and the concept would not be put into the document," Howard said. "I told the speaker candidly we had shopped the proposal to the White House and we had support there."

A Ryan spokeswoman confirmed the call had taken place but had no other comment.

...A person familiar with the tax discussions said rank-and-file House members weren't well-versed on the concept of a mortgage and property tax credit. The idea also wasn't consistent with the original GOP framework, this person said.

The framework called for preservation of "tax incentives for home mortgage interest" but didn't explicitly endorse the mortgage-interest deduction.

The mortgage-interest deduction has been widely criticized by economists and housing advocates because most of its benefits flow to wealthier Americans. A tax credit, by contrast, reach more low- and moderate-income buyers, especially under the GOP framework, which increases the standard deduction.

"Under the framework, the mortgage-interest deduction becomes simply a subsidy for the very wealthy," Howard said. "It doesn’t do anything to promote homeownership."

Last week, the Chicago Tribune looked very pointedly at how the Ryan tax bill could affect property taxes and mortgage interest. Reporter Ken Harney noted that "the political jostling and frenetic lobbying on Capitol Hill over the Republican tax overhaul bill are producing unexpected developments that could prove important to homeowners, sellers and buyers. The drafting of legislative language is a work in progress behind closed doors, but it appears that there have been some key changes in thinking since the White House and congressional Republicans released their 'framework' for the tax bill Sept. 27."

One of the biggest shifts involves deductions of state and local taxes. Republican tax plans have called for a doubling of the standard deduction-- to $12,000 for single filers and $24,000 for joint filers-- paired with the elimination of a slew of popular write-offs, including the state and local taxes deduction.

The so-called SALT deduction is among the most widely used in the U.S. tax code, and it includes income taxes, general sales taxes and property taxes. Eliminating it would raise federal revenues by an estimated $1.3 trillion over the coming 10 years. Zeroing-out SALT has been a crucial element in the Republican tax framework, which badly needs revenue-raisers to counter deep losses caused by rate cuts for corporations and others.

Homeowners, especially in the high tax corridors of the Northeast; Washington, D.C.; Maryland; Virginia; parts of the Midwest; and California, are among SALT's heaviest users. Most of these areas have higher-than-average home prices and household incomes. They tend to vote Democratic but have some Republican representation in the House and Senate.

Those blue-state Republicans, in fact, have been a key force behind the rethinking on SALT. They know their constituents would be disproportionately affected by a total elimination of the SALT deduction, and they've lobbied House and Senate tax-writing committee leaders for relief. Among the possibilities:

• Allowing homeowners to write off property taxes, but not income or sales taxes.
• Giving homeowners the choice of either writing off state and local taxes or mortgage interest, but not both.
• Setting a household income ceiling for eligibility to take the SALT deduction.

It's not clear which, if any, of these might show up in a final legislative package, but the SALT issue is definitely in play. Any of these changes would lower revenues compared with completely eliminating SALT deductions. Limiting the deductions to property taxes but not income or sales taxes, for instance, would cost the government an estimated $300 billion over 10 years. But compromising on SALT would solidify political support for the tax plan among blue-state Republicans, whose votes could be essential to passage.

Another noteworthy area where there's been some rethinking: the mortgage interest deduction. Under the framework proposal, this popular benefit would be left untouched in the tax code. But doubling the standard deduction would mean that far fewer homeowners would choose to itemize and claim it. As a result, say critics, the deduction will be watered down as a financial spur to homebuying. The 1.2 million member National Association of Realtors has been outspoken in demanding that tax writers preserve the effectiveness of the deduction. But in recent weeks, other major housing groups, such as the National Association of Home Builders and the Mortgage Bankers Association, have expressed willingness to explore alternatives-- and that has helped spark interest in creating a new form of subsidy: a mortgage tax credit, perhaps in conjunction with a substantial reduction in the current $1 million ceiling on deductions for mortgage interest.

Under the credit concept, borrowers might be able to subtract some percentage-- say 10 or 15 percent-- of interest payments off their federal tax bottom line, no matter what their income tax bracket. (Deductions, unlike credits, vary based on tax brackets; the higher your bracket, the bigger your deduction.)

J.P. Delmore, a top lobbyist for the home builders association, said his group is seeing “serious interest” in the credit idea. “There is a recognition that a properly crafted credit would provide a broad, meaningful tax incentive to millions of middle-class homeowners who do not itemize currently,” he said. In a speech last week, House Ways and Means Committee Chairman Kevin Brady, R-Texas, confirmed that he is open to re-examining the mortgage interest deduction, including ways to open it up to “all phases of homeownership.” A credit, which would be available to nonitemizers, would fit that description, say supporters of the idea.

Where's this all headed? Republican leaders hope to pass their tax overhaul bill before the end of the year. That's optimistic. But keep this in mind: Whatever happens to the bill, there's a surprising willingness afoot to re-evaluate decades-old approaches to encouraging homeownership with tax benefits while simplifying the tax code.

We'll see how that plays out in the midterm elections in districts with high homeownership, like Orange County and Texas districts like TX-07, TX-21 and TX-32, where GOP incumbents John Culberson, Lamar Smith and Pete Sessions are holding on by a thread. As for Paul Ryan, DC scuttlebutt is that he's realized he can't beat Randy Bryce and that he'll announce his retirement as soon as the GOP passes his tax bill, probably this spring.