House Majority Leader Kevin McCarthy, the highest-ranking California Republican in Congress, on Wednesday challenged the state governor's warning about the proposed elimination of the state and local tax deduction in a GOP tax-reform proposal.
The same day California's state gas tax increase of 12 cents per gallon kicked in, McCarthy called on California Gov. Jerry Brown (D.) to channel his recent concern about the GOP tax reform plan into lowering state tax levels as well.
"If Gov. Brown is worried about the tax burden, let's make cutting [taxes] a federal and state project," McCarthy said in a video his office released Wednesday. "We're lowering rates at the federal level. So if Gov. Brown works to lower rates in California, I will stand right beside him to get that done."
Brown last week sent letters to the Republican members of the California Congressional delegation, calling on them to oppose any type of proposal that would eliminate the state and local tax deduction, also known as SALT. California—a populous, high-tax state—would be among the locales hit hardest by the SALT elimination in the proposed GOP tax reform.
However, McCarthy emphasized that the GOP proposal offsets the SALT elimination by doubling the standard deduction, which he said, "means the first $24,000 per couple is tax free, actually lowering rates for most Californians."
"This bill is a win for everyone, especially the people of California," McCarthy said in the video. "So when I hear Gov. Brown worried about the tax rates going up after we reform the state and local tax deduction, I take his concern to heart."
Republicans have argued that the SALT deduction would not be necessary if California's taxes were not among the highest in the nation.
The potential elimination of SALT and the gas tax increases enacted by the Democrat-dominated California legislature suggest taxes will be an issue in 2018 congressional races, where Democrats are targeting at least seven GOP seats. Democrats are unlikely to retake the majority in the House of Representatives from Republicans without forging a path through California.
Brown's office did not respond to McCarthy's challenge. His office instead referred the letter he sent California Congressional Republicans last week.
In that letter, Brown argued that "getting rid of an individual’s ability to deduct his or her California taxes is a horrible idea, but it is made far worse when you preserve—at the same time—the right of corporations to take those same deductions."
"Can you tell me how much your neighbors and fellow citizens will have to pay because of this proposal? Budget analysts say that it will cost them many thousands of dollars," he argued.
Brown and New York Gov. Andrew Cuomo also held a conference call with the media in both of their states in which they warned of the disproportionate impact the SALT elimination would have on the most populous states in the country.
Republicans counter that wealthy taxpayers benefit the most from the SALT deduction and the provision doubling the individual deduction would provide more tax relief for middle- and lower-income earners.
Both sides are digging in on the issue, looking for a rhetorical advantage that can help sway voters. House Republicans passed a budget late last week that paves the way for the GOP tax proposal to sail through the Senate without Democratic support. Most New York and New Jersey Republicans voted against the budget, citing concerns about the SALT deduction. GOP leaders are now seeking a compromise to sway enough Republicans from populous states whose residents would be impacted the most.
Republicans are fighting California's gas tax hike through ballot initiatives aimed at repealing it, as well as a recall campaigns against key Democrats who voted for it. The gas tax increase went into effect Wednesday and supporters say it is needed to fix the state's roads and bridges.
Last week, the Western Growers Association targeted two Democratic lawmakers who voted for the tax increase in radio ads, pointing out that farmers will have to pay more to transport their crops and Californians already pay some of the highest gas taxes in the country.