ALBANIA – For high-tax democratic states, a comprehensive law passed by Republican Congress in 2017 hurt especially higher-income residents by capping state and local tax deductions to $ 10,000 per year.
Democrats tore up the law then and now.
Will the Democrats, who are now in control of Washington, undo this and cut federal revenue by nearly $ 80 billion a year when President Joe Biden needs new revenue to support his $ 2 trillion infrastructure plan finance?
The battle appears to be being waged in Congress and in state houses across the country.
Democratic governors and both House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer from California and New York with high taxes want the so-called SALT ceiling to be lifted.
So far, Biden, who previously advocated repeal, has been more prudent when trying to collect corporate taxes to pay for his infrastructure plan.
“If Democrats want to propose a way to get rid of SALT – which, you know, is not a source of income; it would cost more money – and they want to propose a way to pay for it, and they want to bring that up, we look forward to it me about their ideas, “Biden press secretary Jen Psaki told reporters on Thursday.
The problem is that in high-tax countries, the ability to deduct the full amount of state and local taxes, including property taxes, cushions living in communities where property taxes alone can easily exceed $ 10,000 a year.
There are concerns that the tax law could lead to further migration of residents from high-tax countries to low-tax countries. New York has lost more than 1 million people to other states in the past decade, and the top 1% pays about 40% of all state income taxes.
“The biggest tax hike seen by hard-working Westchester residents was the GOP-controlled Congress’ s abolition of the SALT tax cap in 2017,” said George Latimer, the district manager in Westchester County, where property taxes are among the highest in the country belong.
Why a SALT cap has become a problem
Since the SALT provision was passed by President Donald Trump and the Republicans in 2017, it has been a major target for Democrats in high-tax countries.
New York Governor Andrew Cuomo led a coalition of states to rail against the law and filed suits to overturn it, but to no avail.
On Friday, Cuomo and the governors of New Jersey, California, Connecticut, Hawaii, Illinois, and Oregon signed a letter calling on Biden to support the lifting of SALT.
They estimated that the cap has resulted in New York and California residents paying $ 12 billion annually in additional taxes to the federal government, as well as an additional $ 3 billion annually by New Jersey residents.
“Like so many efforts by President Trump, the limitation on SALT deductions was based on politics, not logic or good government,” wrote the governors.
“This attack was disproportionately aimed at democratically run states and increased taxes on hard-working families. This was unacceptable at the time and, given the poor economic conditions caused by the pandemic, simply unsustainable.”
The SALT cap was part of a major tax overhaul that allowed larger tax deductions for the middle class and nearly doubling the tax credit for children, as well as some breaks for the rich and corporate.
This is how many families benefited from the 2017 law, particularly on weekly takeaway pay – despite the cap on state and local tax deductions, which mostly affected the rich and upper-middle class.
“When the 2017 Federal Tax Cuts and Jobs Act limited SALT deductions to $ 10,000, millionaire filters, who typically pay six- or seven-digit amounts to the city and Albany, essentially lost one of their largest federal tax breaks.” wrote EJ McMahon, founder of the Empire Center for State Police, a fiscal conservative think tank in Albany.
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Democrats fight for SALT cap
In New York, Democratic lawmakers from these areas have pushed for the cap to be lifted as part of Biden’s infrastructure plan, as the SALT cap mainly violates New York City and its high-tax suburbs.
New Jersey Representatives Bill Pascrell and Josh Gottheimer, as well as New York Representative Tom Suozzi of Long Island, made it clear in a joint statement on March 30th: “No salt, no deal.”
“Because of the GOP cap, our home states of New York and New Jersey have been knocked down and residents have left for other states,” the legislature said.
“This affects middle- and low-income residents in high cost of living states who need to make up the difference.”
Your position, and if more join them, could be a problem for Pelosi. She would be working by a slim majority on the approval of Biden’s infrastructure plan, which relies on higher corporate taxes to fund it.
On Wednesday, Pelosi told reporters that the SALT cap under the GOP-led Congress was “devastating” to their home state of California, and the tax bill itself “gave 83% of the benefits to the top 1%.”
But she said that while she is “sympathetic” with the position of her Democratic counterparts and hopes to include it on the infrastructure bill, she urged them to “withhold any comment on whether or not you are voting for a bill until you see what the.” The bill is.”
Schumer has also vowed to use his leverage to remove the SALT cap. The COVID-19 pandemic made it more critical to limit taxes on residents in high-cost states.
The lift wasn’t included in last month’s stimulus package, but states and local governments were given $ 350 billion nationwide to fill the budget gaps created by the pandemic.
Now Schumer will try to include it in the infrastructure bill.
“When it comes to SALT, New York families needed and made that money before the coronavirus hit. The stakes are even higher now because the cap costs this community tens of thousands of dollars to use in the crisis.” Schumer said in a statement in January.
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Joseph Spector is the government and policy editor for the Atlantic Group of the USA TODAY Network, overseeing coverage in New York, New Jersey, Pennsylvania, Maryland and Delaware. He can be reached at JSPECTOR@Gannett.com or he can be followed on Twitter: @GannettAlbany
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