U.S. House Speaker Nancy Pelosi today suggested the next coronavirus economic stimulus package contain a provision to retroactively lift the cap state and local tax (SALT) deductions.
According to The Hill:
In an interview with The New York Times, Pelosi suggested that reversing the tax law’s $10,000 cap on the state and local tax (SALT) deduction for 2018 and 2019 could be a way to provide individuals with more money.
“They’d have more disposable income, which is the lifeblood of our economy, a consumer economy that we are,” Pelosi told the Times.
The SALT deduction allows taxpayers, as part of their itemized deductions, to subtract state and local income, sales, and property taxes from their federal tax payment. 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.
As previously reported on Conduit Street, the Internal Revenue Service (IRS) has left states little room for a legislative maneuver around the $10,000 cap.
Maryland, Connecticut, New Jersey, and New York are appealing the 2019 decision that tossed a lawsuit challenging the federal government’s cap on SALT deductions.
The appeal challenges the U.S. District Court for the Southern District of New York’s decision to reject the states’ suit, which argued that the SALT cap violated the U.S. Constitution’s Equal Protection Clause and the 10th Amendment, which protects states’ rights.
According to a report from The Government Finance Officers Association (GFOA), 45 percent of taxpayers in Maryland benefitted from the deduction in 2014, more than any other state.
Stay tuned to Conduit Street for more information.
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For up-to-date information and state resources regarding coronavirus, including confirmed case counts and clinician guidance, visit http://health.maryland.gov/coronavirus.