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Parties Could Compromise on Tax Policy

1 min readBy: William Ahern

Gerald Prante has suggested in a New York Post opinion that in federal taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. policy, there are avenues for political compromise.

One idea addresses housing subsidies. Democrats, who must weary of defending the indefensible Fannie and Freddie, would allow the Republican congress to eviscerate those money-losing government-sponsored enterprises in exchange for a tax-raising cap on the mortgage interest deductionThe mortgage interest deduction is an itemized deduction for interest paid on home mortgages. It reduces households’ taxable incomes and, consequently, their total taxes paid. The Tax Cuts and Jobs Act (TCJA) reduced the amount of principal and limited the types of loans that qualify for the deduction. , perhaps the 28% cap that President Obama has suggested in both of his first two budgets. (For a thorough, plain-English debunking of the arguments for keeping the mortgage interest deduction, see UC-Davis law professor Dennis Ventry’s article and our podcast.)

Another idea is climate-centric. The Republican congress would pass something on climate, maybe a gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. hike, in exchange for a cut in the corporate tax rate.

We can’t expect the parties to meet in the middle on issues where they have fundamental disagreements, but we can hope that they’ll be willing to pair up some of their priorities and enact them as a package.