NY Senate Bill S2915: Lifting the SALT Cap for Small Businesses

As our state continues to recover from last year's economic challenges, the existing cap placed on the deductibility of state and local taxes (SALT) has only increased the burden on many Long Islanders. Enacted in the 2017 Federal Tax Cuts and Jobs Act, the SALT cap has raised federal taxes as much as 3.5% on hard-working middle-class taxpayers. There are estimates that this has resulted in New Yorkers paying an additional $15 billion to the federal government yearly, a number even more concerning when you consider that we already give the federal government $35 billion more a year than we get back. While we continue to wait for Congress to remove the cap entirely, I have a plan to help New York's small businesses avoid the cap right now.

I recently introduced NY Senate Bill S2915, legislation that would effectively eliminate the SALT cap problem for many businesses in New York. As it stands now, owners of S Corporations, partnerships, and limited liability companies in our state pay state and local taxes on their businesses at an individual-level and therefore are subject to the SALT cap. What my bill does is impose an elective pass-through business tax on these small businesses instead. By enacting an entity-level tax, business owners choose to pay taxes through their business instead and are therefore no longer subject to the SALT cap limitation of $10,000 at the individual level. Businesses can then deduct the full amount of state taxes paid from their federal taxes, saving small business owners significantly.

For the last four years, the SALT cap has made living on Long Island even harder. It is far past time something is done to fix this problem, and I am committed to doing all that I can to help. While we cannot completely remove the SALT cap for all New Yorkers through state action, this plan will provide much-needed relief to small-business owners hit hard during the pandemic. Let’s lift the cap on small businesses.