Several governors are urging President Joe Biden to support a repeal of the $10,000 cap on state and local tax (SALT) deductions. The push comes as President Biden and Congress begin negotiations on the president’s ambitious $2 trillion infrastructure proposal, which calls for massive investments in America’s roadways, bridges, public transit, ports, and airports.
According to Route Fifty:
“Capping SALT deductions was based on politics, not logic or good government. This assault disproportionately targeted Democratic-run states,” the seven governors wrote in a letter sent to Biden on Friday. They make clear that their preference is to “eliminate the SALT cap entirely.”
Governors signing the letter were: Andrew Cuomo, of New York; Phil Murphy, of New Jersey; Gavin Newsom, of California; Ned Lamont, of Connecticut; David Ige, of Hawaii; J.B. Pritzker, of Illinois; and Kate Brown, of Oregon.
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 SALT deduction at $10,000 – a move of particular import in states like Maryland.
Several states — including Maryland — have passed legislation to allow non-corporate businesses to pay state income taxes at the entity level, rather than at the individual level on their owners’ returns. Because the SALT cap applies only to individuals, these actions were intended to help PTEs avoid the cap.
As previously reported on Conduit Street, the U.S. Treasury and Internal Revenue Service have previously issued guidance to block a different type of state workaround to the SALT deduction cap that was aimed at converting state and local taxes to charitable contributions.
Stay tuned to Conduit Street for more information.