×

UPDATE 1-Tax fight clouds prospects for passing budget in U.S. House

(Adds comments from Ryan, Lance, Reed, King, background)

WASHINGTON, Oct 25 (Reuters) - Republican infighting over a proposal to scrap a popular deduction for state and local income taxes is "an issue of concern" hanging over a budget measure scheduled for a vote on Thursday in the U.S. House of Representatives, a Republican leadership aide said.

Some Republican lawmakers are resisting a proposal to eliminate the deduction, which would hit middle-class voters in high-tax states like New York, New Jersey and California.

The proposal is one of several ideas that have been floated as part of a Republican effort to enact large-scale tax cuts. The budget resolution is essential to pave the way for tax legislation.

The situation "is obviously an issue of concern to a group of members, and the shared goal is to work together to address the issue and move forward," the aide to House Majority Whip Steve Scalise said on Wednesday when asked by Reuters whether there might not be enough Republican supporters to pass the fiscal 2018 budget resolution.

"You do have to broaden the (tax) base in order to lower the rates," House Speaker Paul Ryan said in an interview with Reuters. "With respect to state and local, I think there is a way of addressing the concerns that our members have for middle-income taxpayers in those states so that they are net winners in tax reform as well."

But with the clock ticking toward a scheduled budget vote, the impasse had yet to be settled.

An aide to Republican Representative Tom Reed of New York said there was discussion of a compromise that would call for a tax credit up to a certain income amount to replace the deduction, and that he would support it.

Republican Representative Leonard Lance of New Jersey told Reuters he was not interested in a compromise at this time, and instead wanted the repeal provision taken off the table.

"I will be voting no on the budget tomorrow," he said, adding that talks on the issue were expected to go into the evening.

Representative Peter King, a Republican from New York, told Bloomberg he believed there were enough lawmakers concerned about the potential repeal of the deduction to sink the budget resolution in the House on Thursday.

"This proposal will devastate my district forever," he told Bloomberg. "How anybody from New York and New Jersey can vote for this budget without knowing what is in the tax bill is beyond me."

Republicans have yet to unveil tax legislation. (Reporting by Richard Cowan and Susan Cornwell; Writing by Tim Ahmann; Editing by James Dalgleish and Peter Cooney)