When the expansive Republican rewrite of the federal tax code hits the House floor this week, the final vote will happen in Washington, but its fate will have been decided on the other side of the country.
The 14 House Republicans representing California districts are under intense pressure from constituents, local elected officials and, in many cases, prospective Democratic opponents over provisions that could raise taxes for many residents of the high-tax, high-cost-of-living state.
But so far, only one — San Diego-area Rep. Darrell Issa — has come out against the bill as written; the others have either declared their support or say they are still reviewing the bill ahead of the House vote tentatively scheduled for Thursday. And last month, when the House voted on a budget resolution the party needed to pass to move its tax effort forward, all 14 California Republicans voted for it, even as their GOP colleagues from other blue states revolted.
The support of California Republicans is a big reason GOP leaders feel confident that they will pass the tax bill this week, building momentum for the legislation and increasing pressure on the Senate to pass a bill of its own.
“As long as the people in my district are going to take more money home in their pockets, I’m on board,” Rep. Mimi Walters, a Republican who represents an affluent Orange County district, said last week.
It’s not clear they all would, thanks to provisions in the House GOP bill that would scale back deductions taxpayers can take on mortgage interest and on state and local tax payments.
Some residents would see their taxes go down anyway, thanks to reduced tax rates and the increase of other deductions. But the possibility that many residents in districts similar to Walters’s could see tax increases has generated pushback from GOP members representing the high-tax states of New Jersey and New York, who have mounted a loud campaign to reverse the provisions. Several members from those states have already declared they cannot support the bill, but there do not appear to be enough of them to derail the bill’s passage. But if more of the Californians opposed the bill, House GOP leaders could be forced to make changes.
Their decision to remain largely mute has both mystified and infuriated the Democratic officials who control the state government and occupy influential positions in Washington.
“The New Yorkers understand what this does to their state and to their constituents. That’s why so many [New York Republicans] have said they can’t vote for this,” House Minority Leader Nancy Pelosi (D-Calif.) said Monday. “What is it they realize that hasn’t sunk in with Republicans across the country, especially in California?”
Two provisions in the House version of the tax bill stand to disproportionately affect Californians. A proposal to end the deductibility of interest on mortgage debt greater than $500,000 would have a broad impact in a state that is home to some of the highest home prices in the nation. The state’s median home sale price is already just shy of a half-million dollars, and in coastal areas, the figure can easily outstrip that.
Meanwhile, the decision by House leaders to eliminate the deduction of state income or sales taxes, while preserving a deduction for up to $10,000 for property taxes, has driven much of the opposition from New York and New Jersey members — but it tends to hit California harder.
Californians voted to cap property taxes in 1978, leaving the state in the bottom half nationally in residential tax burden. But the state’s income and sales tax rates are among the nation’s highest. Top earners in California pay a marginal rate of 13.3 percent, versus the 8.82 percent top rate in New York and the 8.97 top rate in New Jersey.
Together, the provision might not only lead to higher tax bills but also to a sudden dip in home values as markets readjust to the new tax provisions, real estate industry lobbyists are arguing.
Rep. Tom MacArthur (R-N.J.) said the relative lack of engagement from the Californians was noticeable as he worked to negotiate the compromise that preserved the partial property tax deduction.
“They’ve been quieter on this issue,” he said. “I think we did remarkably well considering that we didn’t have as much support from those states,” referring to California and Illinois, another high-tax state where Republican opposition has been muted.
Identifying the reasons the Golden State lawmakers have taken a more demure approach is not simple, and interviews with eight of the 14 GOP members did not produce a common reason for the careful approach.
“Everyone’s got their own agenda,” said Rep. Paul Cook, who represents a rural district that stretches from San Bernardino across the Mojave Desert and remains undecided on the bill. “It’s not a perfect world. Somebody’s going to be upset with it. One might think I hope it does stimulate growth.”
Pelosi on Monday called it “philosophical” stance after a news conference where she accused the GOP of declaring war on suburban voters.
“The Republicans in Congress believe in trickle-down economics. That’s what this is about,” she said. “They care more about pleasing the wealthy than they do about honoring the concerns of their constituents.”
Some of the members have argued that scaling back the state-and-local-tax deduction would send a signal to Sacramento to roll back the state’s own high taxes.
“Why punish the rest of the nation because California is stupid?” said Rep. Duncan D. Hunter in an Oct. 27 interview with a San Diego TV station. “I’m not going to keep the economy down for the whole country because California has bad government.”
Another factor is geography: Of the 14 California House Republicans, many represent inland districts where incomes are lower, home prices are lower, and fewer people take advantage of the itemized deductions the GOP would eliminate than do in the state at large.
“Look at the numbers: $37,000 median income, homes are not half-a-million-dollar homes, so those provisions affect us a lot differently,” said Rep. David Valadao, a Republican who represents a heavily agricultural swath of the Central Valley and says he’ll vote for the bill. “I’m not going to vote based on the state of California and 40 million people; I’m going to vote based on how it affects people in my district.”
But the biggest factor might be leadership. Two senior members of the California GOP delegation are in key roles: Rep. Devin Nunes, who represents a Central Valley district, sits on the tax-writing Ways and Means Committee and is a key architect of the House bill’s business-related provisions, and Majority Leader Kevin McCarthy, a Bakersfield native, is the point man for passing the Republican agenda through the House.
“What’s the difference between New York, New Jersey and California? Kevin McCarthy,” said one Democratic operative who spoke on the condition of anonymity.
Behind the scenes, according to several Republicans who were not authorized to speak publicly about the tax effort, McCarthy has urged his fellow California Republicans not to air any grievances publicly while urging them to privately pursue changes to benefit their constituents — similar to the approach he used with a GOP health-care bill, which passed the House in April with support from every California Republican.
McCarthy, in an interview, said he has used a spreadsheet detailing the district-by-district impact of the tax bill, asking his colleagues to focus on the aspects of the bill that will help Californians who might lose their deductions — lower rates, the elimination of the alternative minimum tax, and incentives for faster economic growth.
“Just listen,” he said. “Take the bill in its entirety.”