The ongoing effort in Congress to lift a controversial cap on the deduction that can be taken for state and local taxes began a new chapter on Friday as another bipartisan group of lawmakers began attempts to revive a bill very similar to one that failed to advance last session.
Reps. Andrew Garbarino along with co-sponsors Anthony D’Esposito and Nick LaLota are among 46 lawmakers to resuscitate the core of the SALT Deductibility Act which expired along with the 117th Congress in January. The three New York Republicans formally announced the effort at a press conference held Friday in Franklin Square, a hamlet in Long Island.
“Long Islanders pay some of the highest property taxes in the country, the hard-working families in my district and all over Long Island can only deduct a portion of their real property taxes,” said Garbarino. The Congressman also referred to New York as a “donor state” that sends more money to the federal government than it receives in benefits.
LaLota tied national demographic trends to the SALT deduction saying, “New York State has the dubious distinction of leading the nation in two categories, out of state migration and the highest tax burden in the nation at 12.47%. The legislation we’re sponsoring today will hopefully meet that burden a little bit lighter.”
The SALT deduction was capped at $10,000 as part of the 2017 Tax Cuts and Jobs Act. Critics of the policy claim the law is unfair for residents of high tax states while muni issuers say the cap infringes on their sovereign ability to levy future taxes. H.R. 2555 proposes to repeal the limitation on the deduction for state, local, property, and income taxes.
The three legislators at the press conference are all members of the SALT Caucus, a bipartisan group of lawmakers who achieved a relaunch of their group in February. The caucus was a thorn in the side of the 117th Congress who threatened to torpedo the Tax Cut and Jobs Act if the SALT cap was included.
Support for eliminating the SALT cap deduction cuts across political lines and chambers of Congress. In March, Sen. Susan Collins threw her support behind the SALT Deduction Fairness Act, which would double the deduction to $20,000. Rep. George Santos, another New York Republican, has introduced SALT legislation. Reps. Mikie Sherrill, D-N.J. and Mike Lawler, R-N.Y. also have a bill they are trying to move.
“Politically savvy people pointed out that when Republicans got back control of the House they needed a lot of swing districts,” said John Buhl, senior communications manager at the Urban Institute. “It’s not too surprising that some new members see a different political dynamic out there. Now that the 2017 law has been in place, they’re asking, ‘what do my constituents really want and how can we get that into the broader fiscal narrative?'”
The path to becoming law would have to include the bill moving through the House Ways and Means Committee which feels like a stretch. “I really don’t see anything having any kind of major traction in Congress until the debt ceiling and appropriations stuff is settled,” said Buhl. “I think that’s going to be a very difficult and long discussion.”
Many states have worked with the IRS to develop financial workarounds that allow businesses to reimburse their tax burdened owners through tax deductions or credits – which don’t provide any relief for non-business owners.
“There’s always going to be examples in a large tax reform package of people who get the short end of the stick,” said Buhl. “If Congress doesn’t come up with some kind of permanent, long-term reform it’s just going to make things a lot more complex for everyone.”