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Senate still grappling with tax bill that would have big impact in Maryland

Senate Republicans were scrambling Thursday to lock down support for a major tax overhaul that could deliver President Donald J. Trump one of his first legislative victories while potentially cutting — or increasing — the taxes paid by nearly 3 million Marylanders.

Republican leaders, negotiating last-minute changes to secure votes from within their own ranks, appeared to have momentum on their side early in the day as they sprinted toward a final vote. But as the evening wore on, a compromise to appease deficit hawks appeared to break down — slowing progress.

Majority Leader Mitch McConnell said late Thursday that work would continue on the bill Friday.

The $1.4 trillion package, the first major rewrite of the U.S. tax code in more than three decades, would lower the corporate tax rate to 20 percent from 35 percent, nearly double the standard deduction on personal income taxes and either limit or rescind a host of popular deductions.

Some of those changes may have an outsized effect in Maryland, where a higher share of residents itemize their deductions than in any other state in the nation — nearly 1.4 million people, or about 45 percent of state filers. At least one independent analysis estimates about 72 percent of state filers would receive a tax cut under the proposal.

GOP leaders received a boost Thursday when Sen. John McCain announced he would support the measure. The 2008 Republican presidential nominee has frequently been at odds with Trump, and helped to stop an effort by his party earlier this year to repeal the Affordable Care Act.

“This is not a perfect bill, but it is one that would deliver much-needed reform to our tax code, grow the economy, and help Americans keep more of their hard-earned money,” the Arizona Republican said.

McConnell said early in the day that he expected a final vote as soon as Thursday. But that timetable was thrown into question during maneuvering over language designed to prevent large increases in future budget deficits.

Republican leaders are eager for a legislative victory after having controlled the White House and both chambers of Congress for nearly a year. While Trump has blamed “obstructionist Democrats” for the lack of progress on his agenda, the Senate tax bill — like the health repeal before it — can win approval with Republican votes alone.

Republicans can afford to lose two votes from their 52-seat majority. If the Senate approves the measure, lawmakers would have to reconcile the bill with a significantly different House-passed version of the legislation before sending it to the White House.

The House and Senate versions have drawn universal opposition from Democrats, who have had little hand in writing the legislation. Democrats point out that not everyone would receive a cut under the proposals – about 800,000 Marylanders would face an increase, according to one analysis of the House bill. And they have noted that many of the personal tax cuts would be temporary.

Reductions in corporate tax rates would be permanent while individual cuts would need to be renewed in 2025.

“The bill is not targeted at middle income, it’s targeted at the wealthy,” said Sen. Ben Cardin, a Maryland Democrat and a member of the Senate Finance Committee. “One thing is clear: The bill’s only going to get worse, and it’s going to get more expensive.”

The Senate bill would generate an additional $458 billion in tax revenue over a decade because of economic growth, according to an analysis released Thursday by the nonpartisan Joint Committee on Taxation. That number is far short of the $2 trillion that had been floated by the Trump administration.

That same report found that the plan would add $1 trillion to the deficit over a decade, a number that made some Republicans skittish.

How deeply the legislation would affect Maryland specifically remains unclear. State officials have not yet estimated the effect on revenue. Depending on the final version, the changes at the very least may prompt thousands of state income tax filers to claim the new, higher standard deduction rather than itemizing their taxes.

In Maryland, the number of families that choose to do that will probably depend in large part on the way the final package handles the state and local tax deduction.

The deduction has had bipartisan support for years under the premise that people should not be taxed twice on the same income. But some Republicans say it essentially subsidizes high-tax states like Maryland, New York and California — which also happen to be mostly Democratic.

The Senate version of the bill would eliminate the deduction entirely, although there were indications that might change. Sen. Susan Collins of Maine told reporters Thursday that she would not vote for the bill unless people could deduct as much as $10,000 in property taxes.

That would put the legislation in line with the version approved by the House on Nov. 16.

The House bill would also limit the federal deduction on mortgage interest, claimed by roughly one-third of Marylanders. The House bill reduced from $1.1 million to $500,000 the amount of mortgage debt a taxpayers may claim. The Senate bill is less aggressive, cutting the mortgage cap down to $1 million.

The average mortgage in Maryland in 2016 was $252,217, according to Experian — well below both numbers.

The left-leaning Institute on Taxation and Economic Policy estimated last month that about 2.2 million Marylanders would receive a tax cut averaging about $2,000 under the plan and that roughly 612,000 people would receive a tax increase averaging $1,540. About three-quarters of people earning between $50,520 and $76,590 would get a cut of about $1,000.

Another 24 percent of people in that income range would receive an increase averaging $880, according to the analysis.

“It raises taxes on working families, puts health insurance out of reach for millions, and creates large deficits lawmakers can later use to justify damaging cuts,” Christopher Meyer, a research analyst with the Maryland Center on Economic Policy, wrote recently on the group’s website. “If this bill passes, it will do lasting harm to many Maryland families.”

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