ICYMI: Push To Repeal 'Body Blow' SALT Cap

WASHINGTON, DC — A group of New York lawmakers in a bi-partisan effort are pushing for a repeal of the $10,000 cap placed on the State and Local Tax deduction — better known as the SALT cap — that was approved under former President Donald Trump's administration in 2017.

Democrats New York Senator Chuck Schumer and U.S. Rep Thomas Suozzi on Thursday introduced paired legislation to eliminate the $10,000 cap on the SALT deduction starting in 2021. The proposal would allow taxpayers to fully deduct their state and local taxes on their federal income returns as they did prior to 2017 legislation.

Before the cap was placed, the average SALT deduction on Long Island was about $20,000 across over 700,000 households, lawmakers said.

"The cap on SALT deductions has been a body blow to New York families," said Suozzi, adding that without the full deduction, "families will leave New York and the last thing needed in the midst of the health and economic devastation of COVID-19 is to lose our residents and taxpayers.

U.S. Senator Charles Schumer said the money should have been restored before the COVID-19 pandemic, but now the "stakes are even higher" because "the cap is costing tens-of-thousands of dollars they could be used amid the crisis."

"We need to bring our federal dollars back home and cushion the blow this virus — and this harmful SALT cap — has dealt so many homeowners and families locally," he said.

Before the cap was enacted, taxpayers could deduct state and local real estate and personal property taxes, as well as either income taxes or general sales taxes as part of their itemized deductions. State and local income and real estate taxes made up about 60 % of local and state tax deductions while sales tax and personal property taxes made up the remainder, according to the lawmakers, Suozzi said.

Citing data from the Tax Policy Center, Suozzi said that about one-third of tax filers had itemized deductions on their federal income tax returns

Suozzi, who first detailed how limiting the SALT deduction adversely affected Long Island at a House Ways and Means Committee meeting in 2019, noted that New Yorkers already subsidize other states by paying $36-to-45 billion more in taxes than they receive back from the federal government. Leaving the the SALT cap where it is would result in "double taxation" by imposing federal taxes on the income used to pay state and local taxes, Suozzi said.

Suozzi said the elimination of the deduction "drives wealthier people to other states and leaves middle- and lower-income taxpayers holding the bag to pay for school, police and other essential state and local tax burdens."

Freshman U.S. Rep. Andrew Garbarino (R-Bayport), also a member of the Problem Solvers Caucus, joined with Suozzi in introducing the legislation. He said the SALT tax cap "unfairly penalizes Long Islanders," leaving a "devastating effect on New York."

"Not being able to deduct state and local income taxes is a case of double taxation, which is the last thing my constituents need during a global pandemic," he stated. "I'm pushing for a full restoration of the SALT deduction – Long Islanders deserve to be treated fairly and similarly to the rest of the country."

The legislation was met with support from several influential lobbying groups in Washington, DC, including the U.S. Conference of Mayors, International Association of Firefighters, the national associations of counties, realtors and police organizations, as well as the National Federation of Teachers.