Bill to Restore Full SALT Deduction Emerges in New Congress

The State and Local Tax “SALT” deduction was capped by the tax law passed in late 2017.

Two New York lawmakers in the U.S. House have re-introduced a bill to fully restore a federal tax deduction for state and local taxes that was capped under the massive federal tax overhaul that was enacted a little over a year ago.

The SALT deduction allows taxpayers to subtract state and local income, sales and property taxes from their federal tax payment, as part of their itemized deductions. But Congress in 2017 capped the amount of SALT deductions taxpayers can take at $10,000 – a move of particular import in States like Maryland.

Members of Congress— particularly those from Maryland, California, Connecticut, New Jersey, and New York — protested the cap, but were unsuccessful in their efforts to strip it from the 2017 law.

According to Route Fifty:

It would eliminate a $10,000 cap the 2017 GOP-led tax code revamp imposed on the federal income tax deduction for state and local property, income and sales taxes that households pay. Lowey and King sponsored a nearly identical two-page bill in the last Congress.

But capping the deduction promises to raise around $650 billion for the federal government over 10 years, providing a key revenue boost to partially offset other policy changes, including the corporate and individual rate cuts, that were core elements of the tax law.

One of the main arguments state and local groups made against eliminating or curtailing the SALT deduction, is that it would make it harder for states and localities to impose and raise their own taxes to help pay for projects and services.

In the meantime, Attorney General Brian Frosh has joined Maryland with Connecticut, New Jersey, and New York in suing the federal government over capping the state and local tax (SALT) deduction through tax reform. The claim alleges that the new $10,000 SALT cap violates the U.S. Constitution’s Equal Protection Clause and the 10th Amendment, which protects states’ rights.

Attorney General Frosh stated:

Eliminating the SALT deduction will jack up taxes for more than half a million Marylanders. It is an attack on state sovereignty. It will reduce funding for local law enforcement and for construction of infrastructure statewide, and it will cripple our ability to educate our kids.

Read the full article for more information.