(Bloomberg) -- Senate Majority Leader Chuck Schumer and Representative Tom Suozzi, both New York Democrats, are leading efforts to fully repeal the $10,000 limit on state and local tax deductions, or SALT.
The lawmakers have introduced legislation in the House and Senate that would roll back the $10,000 cap included in Republicans’ 2017 tax law, which would allow taxpayers to write off the full amount of their state and local tax bills. That change would be a boost to many in high-tax states, like New York, New Jersey and California, where the deduction is most valuable.
“The cap on SALT deductions has been a body blow to New York families,” Suozzi said in a statement Friday. “The full SALT deduction must be restored. Without the full SALT deduction, families will leave New York and the last thing we need in the midst of the health and economic devastation of Covid-19 is to lose our residents and taxpayers.”
The legislation would immediately repeal the cap on SALT write-offs, which politicians representing the high-tax states says is fueling an exodus as residents seek move to locations with lower costs of living. The move would probably have to rely just on Democratic votes, making it more challenging to pass in the Senate, where the partisan split is 50-50.
House Democrats have made several attempts to reverse the cap in recent years, all of which were blocked in the Republican-controlled Senate. Now that Schumer is the majority leader, Democrats are hopeful they can reclaim the tax break. But they will need to keep their caucus together.
Stimulus Inclusion
Representative Josh Gottheimer, a New Jersey Democrat, said this week he is leading an effort to push congressional leaders and Treasury Secretary Janet Yellen to include the SALT cap repeal in the virus-related stimulus bill the White House is pursuing. An immediate repeal of the SALT break is a long-shot effort because it would require all Senate Democrats, and potentially some Republicans, to agree to include measures not directly tied to the pandemic in the legislation.
However, SALT is a priority for Democrats as they pursue broader tax legislation, and it could be included in legislation later this year that could be passed on Democratic votes alone.
Repealing the SALT cap is a costly proposition. To allow unlimited deductions just in 2021 would cost $88.7 billion, according to the Joint Committee on Taxation, Congress’s non-partisan scorekeeper. Permanently repealing the limitation would cost many multiples of that.
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