U.S Senate Majority Leader Charles Schumer and U.S. Senator Kirsten Gillibrand introduced legislation in the new Congress to eliminate the $10,000 cap on the State and Local Tax (SALT) deduction starting in 2021. The proposal would allow taxpayers to fully deduct their state and local taxes on their federal income returns. In 2017, the deduction was capped at $10,000 and resulted in a tax increase for many middle-class families.
“When it comes to SALT, New York families needed and deserved this money before the coronavirus took hold, the stakes are even higher now because the cap is costing this community tens-of-thousands of dollars they could be using amid the crisis,” said Senator Schumer. “That is why I am proud to be leading this legislation to restore our full SALT deduction. Double taxing hardworking homeowners is plainly unfair; We need to bring our federal dollars back home to cushion the blow this virus—and this harmful SALT cap—has dealt so many homeowners and families locally.”
Schumer and Gillibrand pointed to the following reasons for why the SALT deduction is unfair to New Yorkers:
· New Yorkers already subsidize other states by paying $36-45 billion more in taxes than we receive back from the federal government;
· The repeal of the SALT deduction results in double taxation by imposing federal taxes on the income used to pay state and local taxes;
· The elimination of the deduction drives wealthier people to other states and leaves middle- and lower-income taxpayers holding the bag to pay for school, police and other essential state and local tax burdens.