Now that the House and Senate have passed their respective federal tax reform bills, the two chambers met in conference this week to negotiate a final version. President Trump made headlines this week when he suggested the final bill may raise the corporate rate from 20 to 22 percent, seemingly without any consultation with key Congressional Republicans. 

House Speaker Paul Ryan (R-Wisconsin) and Senate Majority Leader Mitch McConnell (R-Kentucky) fought hard for the current 20 percent rate, only to be up-ended by the Administration down the final stretch of the legislative process where industry groups are making last-ditch lobbying efforts to dramatically alter the reform measure. Speaker Ryan and Senator McConnell are entertaining proposals on the mortgage interest deduction, state and local income/property tax deductions and a child tax credit, in order to secure votes on the final bill.  New tax breaks will raise the cost of the bill, which must remain under $1.5 trillion in order to pass the Senate, and tax negotiators may be forced to consider President Trump’s suggested rate hike as a last resort offset for these proposals.

House Republicans from California, New York and New Jersey are making their final case for language that will soften the bill’s deduction cuts for high-tax states. California Republicans are pushing an amendment that would allow taxpayers the option to deduct $10,000 of either their property or state and local income taxes, while the current language only allows the deduction for property taxes.  This past week, Senator McConnell and House Ways and Means Committee Chairman Kevin Brady (R-Texas), both publicly expressed interest in reinstating the state and local income tax deduction to appease members from high-tax states.