President Trump in his address to Congress on Tuesday revived a campaign pitch to create a tax deduction for interest payments on car loans, amid a broader push for sweeping tax cuts.
The core of Mr. Trump’s tax agenda is extending the tax cuts from his first term that are set to expire at the end of the year absent congressional action. He reminded lawmakers gathered in the House chamber for his speech that he wants those tax cuts to be made permanent, so that taxpayers have more certainty.
The president also reiterated his frequently touted plan to exempt tips, overtime pay and Social Security benefits from income taxes.
“I also want to make interest payments on car loans tax deductible, but only if the car is made in America,” he said.
Mr. Trump pitched the tax deduction for car loan interest during a few campaign stops last year — including one in Detroit, where many automakers are headquartered — but he has not talked about it since becoming president. Nor was it on a list of tax priorities the White House said he presented to lawmakers when they were in the process of crafting a budget blueprint for enacting his agenda.
The Tax Policy Center said a deduction for interest on car loans could cost as much as $10 billion per year if structured as an above-the-line deduction, meaning it would be available to taxpayers whether they itemize or claim the standard deduction.
The budget plan the House adopted last week provides a net cost ceiling of $4.5 trillion for tax cuts, which Senate Republicans have said is not high enough to make the expiring 2017 provisions permanent and enact the president’s new tax proposals.
The Congressional Budget Office has estimated that a permanent extension of the 2017 tax cuts would cost $4.6 trillion over 10 years. Senate Republicans want to use a budget gimmick to change the baseline used to measure the cost of the tax cuts from current law to current policy, which would effectively zero out the cost of extending any tax cuts already in law.
Before Mr. Trump launched into a brief list of his tax proposals, he urged Democrats to join Republicans in voting for the tax cuts or risk being voted out of office.
