Treasury Secretary Steven Mnuchin reportedly contends that the removal of the tax deduction for state and local taxes remains an important part of the administration's reform plan.
"We can't have the federal government continue to subsidize the states," Mnuchin told CNBC. "That's a major loophole that we're trying to close in simplifying taxes."
President Trump is reportedly unhappy with eliminating the "SALT" deductions on grounds it would penalize middle-class earners.
Mnuchin also says the administration won't budge on the proposed cut in the corporate tax rate to 20 percent.
Trump's tax overhaul package is getting resistance from an unusual alliance of interests opposed to his plans to scrap the federal deduction for state and local taxes, the AP reported.
Republican lawmakers from high-tax states such as New York, California and New Jersey, along with labor unions and business groups like Realtors, are pressing the Trump administration to reconsider plans to eliminate the deduction. These groups are wary of the financial pinch their constituents could feel.
"This is really almost like a life or death issue for districts like mine," says Rep. Peter King, R-N.Y., who represents a district on New York's Long Island. "This cannot be called a rich district. It serves a lot of middle-income people."
With Republicans splintered, the future of the $6 trillion tax overhaul plan is threatened by GOP defections, even as the success of the package is a political imperative for Republicans who have pinned their hopes on notching a big legislative achievement to help them retain control of Congress in next year's elections.
Meanwhile, Mnuchin also said Trump could decide on a new chair of the Federal Reserve in the next month, but added that no specific deadline for the nomination had been set, Reuters reported.
“I think given the timing of this, this is something that the president is focused on, trying to make a decision in the next month, although we don’t have a specific deadline,” Mnuchin said in the interview with CNBC.
(Newsmax wires services contributed to this report).
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