Mnuchin backs key provision in Trump tax plan that would hit Democrats hardest

President Donald Trump (R) and Treasury Secretary Steven Mnuchin walk out of the Treasury building, April 21, 2017.

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President Donald Trump (R) and Treasury Secretary Steven Mnuchin walk out of the Treasury building, April 21, 2017.

Eliminating it would generate tens of billions of dollars in revenue needed to offset the money lost from lowering tax rates on individuals and corporations. For the tax years 2016 through 2020, letting taxpayers off the hook for taxes paid to state and local governments will cost the Treasury nearly $370 billion, according to a report from the congressional Joint Committee on Taxation.

Proponents of the deduction have long argued that, without it, taxpayers would be hit twice for each dollar of income, by their state and by the U.S. Treasury. Opponents argue that the deduction benefits the richest taxpayers at the expense of those with lower incomes, or who don’t own a home or make large purchases that carry a big sales tax.

The provision tends to benefit wealthier individuals because they pay higher state and local taxes on income, real estate and other property. But the tax break also benefits some middle-income households, a realization that may complicate the White House’s tax overhaul effort.

President Donald Trump reportedly grew angry when he learned that the change would hurt some of those middle-income taxpayers, Bloomberg reported Thursday.

The White House press office released a statement to Bloomberg that said in part: “The president has made it unequivocally clear that a key priority for tax reform is to cut taxes for America’s hardworking middle class families.”

One thing is clear: Eliminating the deduction would hurt taxpayers who voted for Hillary Clinton a lot harder than it would those who voted for DTrump, according to a CNBC analysis of voter and tax data.

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