Bill to Modify State Tax Deduction Splits Opinions During House Hearing
WASHINGTON — A congressional committee took a last look at a Democratic proposal to repeal a cap on state and local taxes before a vote expected in the U.S. House this week.
The cap is a $10,000 limit on state and local income tax deductions Republicans inserted into the 2017 tax reform legislation, saying it would prevent taxpayers who itemize from subsidizing higher state taxes.
Republicans also said repealing the state and local tax (SALT) deduction would unfairly benefit the wealthiest taxpayers.
“Fifty-one percent of the benefit would go to people who earn over a million dollars,” said Rep. Tom Rice, a South Carolina Republican, during a hearing Monday of the House Rules Committee.
Proof the 2017 tax reform legislation was worthwhile can be found in the booming stock market and low unemployment rates in the past two years, according to Rice.
Tampering with the tax code by repealing the SALT tax cap could interfere with recent economic gains, he said.
He warned increasing state and local tax deductions would shift more of the burden to pay for public benefits to the federal government.
“The effect of it is that the federal government subsidizes high tax jurisdictions,” Rice said.
The Democratic bill would increase the cap on state and local tax deductions to $20,000 for married couples for 2019 and repeal the cap for 2020 and 2021.
Rep. Tom Cole, an Oklahoma Republican, said the Democratic proposal would be “a big giveaway to very wealthy people.”
Other provisions in the Democratic repeal bill would increase the deduction for educators’ expenses and allow first responders to deduct job-related costs. The top individual tax rate would increase from 37 percent to 39.6 percent for 2020 through 2025.
Democrats who spoke during the House Rules Committee hearing said the $10,000 cap impedes state governments’ ability to provide public services. The biggest complaints come from high tax states like California, New Jersey and New York.
The Democrats expressed concern the highest-earning residents would move to lower tax states if the $10,000 cap is not eliminated.
“For me, it’s about fairness,” said Rep. Brad Schneider, an Illinois Democrat. “That burden is going to fall on working families.”
The current cap “is quite simply double taxation, and it is wrong,” Schneider said.
Raising the cap under the pending bill would generate $2.4 billion in deficit reduction, he said.
“It pays for itself,” Schneider said.
In The News
The United States and France agreed Thursday to proceed with talks that could result in a global rewrite of cross-border tax rules for the digital era. The agreement to temporarily set aside a brewing tariff war over France’s digital tax on big tech companies to focus... Read More
WASHINGTON - House Democrats voted to lift a $10,000 limit on state and local tax deductions, known as SALT, repealing a deduction limit Republicans had imposed as part of their 2017 tax code overhaul. The bill, H.R.5377 , which was enthusiastically backed by Rep. Josh Gottheimer,... Read More
WASHINGTON -- A congressional committee took a last look at a Democratic proposal to repeal a cap on state and local taxes before a vote expected in the U.S. House this week. The cap is a $10,000 limit on state and local income tax deductions Republicans... Read More
WASHINGTON — The House Ways and Means Committee could take up legislation as early as next week that would increase a limit on state and local tax deductions that has riled Democrats from high-cost regions, according to a senior panel member. The “SALT” bill, which has... Read More
WASHINGTON — The 2nd U.S. Circuit Court of Appeals on Tuesday ruled Congress is entitled to review President Donald Trump's banking records as it investigates possible foreign influence in U.S. elections, violations of the emoluments clause and other issues. The three-judge 2nd Circuit panel said Congress... Read More
WASHINGTON - Four states are appealing a federal judge’s September dismissal of their lawsuit challenging federal authority to limit state and local tax deductions. In a filing before the 2nd U.S. Circuit Court of Appeals, attorneys for the states argue the cap unconstitutionally interferes with their... Read More