Democrats consider changes to limit state and local tax deductions

Representative Tom Suozzi, DN.Y., speaks during a press conference announcing the State and Local Tax Caucus (SALT) outside the United States Capitol on April 15, 2021.

Sarah Silbiger | Bloomberg | Getty Images

President Joe Biden on Thursday released a framework for his $ 1.75 trillion spending program. And while he hasn’t proposed any changes to the $ 10,000 cap on the federal deduction for state and local taxes, known as SALT, some lawmakers are still asking for a last-minute addition.

“Certainly the whole buzz on the Hill is that even though the SALT article was not in the proposal Biden released yesterday, that’s not the end,” said Howard Gleckman, senior researcher at Urban. -Brookings Tax Policy Center. .

The current limit prevents Americans who itemize deductions from writing off more than $ 10,000 for property taxes and state income taxes on their federal returns.

It’s a problem in high-tax states such as New York, New Jersey and California since former President Donald Trump added the cap as part of his 2017 tax overhaul.

More from Personal Finance:
Here’s how Biden’s Build Back Better framework would tax the rich
Paid Leave Advocates Criticize Exclusion from Social Spending Bill’s Policy
Improved child tax credit will continue for 1 more year, according to Democratic plan

The SALT deduction limit has been a sticking point for some lawmakers in those states, threatening to torpedo Democrats’ social and climate plan. However, many are still struggling for relief.

“No SALT, no deal!” tweeted Representative Tom Suozzi, DN.Y., a longtime supporter of the repeal of the SALT cap. “I have no doubts that this will be part of the final deal.”

Another advocate, Rep. Josh Gottheimer, DN.J., expressed a similar level of optimism for the changes.

“I think, based on every conversation I’ve had with leaders, my colleagues in the Senate and the White House, that SALT will be in the bill,” he said. “They know they don’t have the votes without it.”

What is still possible

“They are clearly not going to repeal the SALT cap for good,” Gleckman said. “It’s too expensive.”

The deduction limit grossed $ 77.4 billion in its first year, according to the Joint Committee on Taxation, and a full repeal for 2021 could cost as much as $ 88.7 billion, and more within years to come.

Yet Democrats need the support of nearly every member of the House and every Democratic senator to pass their spending plan.

They have to find a way to satisfy the handful of Democrats in the Blue State who have really, really made it their main problem.

Howard gleckman

Principal Investigator at the Urban-Brookings Center for Fiscal Policy

“They have to find a way to satisfy the handful of Democrats in the Blue State who have really, really made it their main problem,” Gleckman said, referring to members of the so-called SEL Caucus who say the limit hurts middle-class families.

One proposal, for example, removes the cap for 2022 and 2023 and restores it for 2026 and 2027, after it expires under the Tax Cuts and Jobs Act.

However, future changes and projected revenues may depend on who controls Congress, said Steve Wamhoff, director of federal tax policy for the Institute on Taxation and Economic Policy.

Another option, lifting the limit for households below a certain income threshold, may also be possible, Gleckman said, explaining that the provision can always be adjusted “in an infinite number of ways.”

However, opponents say the changes can mainly help the wealthiest families, with more than 96% of the profits going to the richest 20%, according to the report. Center for Tax Policy.

“The problem Democrats have with repealing the SALT cap deduction is that it looks terrible,” Gleckman said, particularly as lawmakers cut back paid family leave plans and other programs for low income families.


Source link

About Scott Conley

Check Also

Limit interest rates without limiting access to credit

Setting limits on interest rates can have unintended negative consequences for borrowers. Sir Isaac Newton …

Leave a Reply

Your email address will not be published. Required fields are marked *