Tax Watch columnist David McKay Wilson discusses changes to federal tax law in the deduction of state and local tax payments.
While the 2021 tax filing season was in full swing, three members of the U.S. Congress joined Westchester County Executive George Latimer on a homeowner’s lawn in Greenburgh to call for the federal cap on state and local tax deductions to be lifted.
The cap, enacted in Donald Trump’s first year in office in 2017, has violated suburban homeowners – both the middle class and the ultra-rich, who receive the greatest benefits of the SALT tax break.
Democratic Congressmen – Mondaire Jones, D-Nyack, Jamaal Bowman, D-Yonkers and Tom Suozzi, D-Glen Cove – posted on a homeowner’s lawn in Greenburgh say the repeal would restore the fairness of federal tax law.
“We are struggling mightily to achieve this lifting,” said Jones in the front yard of Ayeshah and Brian Parker in Greenburgh’s Parkway Homes neighborhood.
Ayesha Parker, who has lived on Stone Avenue in Greenburgh with her husband for a decade, said the cap has increased the tax burden on her family of six, which includes children ages 1, 3, 6 and 8. Parker is a community worker at the North American Family Institute while her husband is a media specialist at the Bronxville Schools.
“Our quality of life is affected by this measure,” she said. “Restoring the vent would make a difference to our budget.”
However, gaining the traction for change in Washington, DC has proven elusive.
The deductibility cap remains popular with Republicans, who say the tax break favors the affluent Northeast and encourages more spending at the local level. Even some progressive Democrats, like US Representative Alexandra Ocasio-Cortez, D-Bronx, want to keep the cap because wealthy homeowners are the ones who benefit most from state and local tax deductions.
It’s not uncommon for Westchester’s upper crust to pay more than $ 50,000 in property taxes, and there are a select number of Westchester’s money elites who pay more than $ 100,000 a year.
A 2020 study by the Brookings Institution found that if the cap were lifted, 57% of benefits would go to the top 1% of homeowners, with average savings of $ 33,000. The top 0.1% of taxpayers would get 25% of the benefits, with an average tax saving of nearly $ 145,000.
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Bowman, a member of The Squad in Washington with Ocasio-Cortez and other progressives, has split with the left on this issue. He claims that many Westchester homeowners, like himself in Yonkers and the Parkers in Greenburgh, would have to pay less federal taxes if repealed.
Ocasio-Cortez, who grew up in Yorktown, voted against the repeal in 2019.
“It would benefit homeowners in Yonkers as well as those in Bronxville and Scarsdale,” Bowman said.
Lawsuits on the cap in the spotlight
The revived attention to the SALT caps comes when federal judges in Manhattan weigh two lawsuits on the cap. One was filed by New York State, arguing that the limit is against the US Constitution. There is another lawsuit by Scarsdale and the City of Rye under the Charitable Withholding Coalition suing the IRS over their rule that banned local authorities from creating charitable charitable foundations to circumvent the cap.
Suozzi’s appearance in Westchester commemorated his 2006 bid for the Democratic nomination for governor when he led an unsuccessful primary campaign against Eliot Spitzer. Suozzi’s name surfaced in discussions about an offer for 2021 if Governor Andrew Cuomo fails to survive current investigations into allegations of sexual misconduct and his handling of reports of care home deaths in the COVID pandemic.
Suozzi said the SALT cap strengthens New York’s position as a donor state by providing the federal government with more tax revenue than it gets for its citizens in federal benefits. He said he had 106 co-sponsors, including Jones, from 12 other states. A similar bill was passed in 2019 but died in the Senate.
He hopes the SALT repeal will be merged into a broader federal funding bill that could be voted on under the reconciliation rules that allow a simple majority bill to be passed in the U.S. Senate, as happened in the recent COVID business stimulus bill.
Suozzi acknowledged that the rich would be particularly fine with the cap being lifted. This could be counteracted by increasing the highest income tax rate from 37% to 39.6%.
“I won’t be voting for a tax hike if they don’t restore the SALT deduction,” he said.
Follow David McKay Wilson on Facebook or Twitter @ davidmckay415