Representative Tom Suozzi, DN.Y., speaks during the State and Local Taxation (SALT) news conference outside the U.S. Capitol on April 15, 2021.
Sarah Silbiger | Bloomberg | beautiful pictures
Despite the hurdles, five House Democrats are still fighting for relief over the $10,000 limit on the federal deduction for state and local taxes, known as the SALT.
Representative Mikie Sherrill, DN.J., sent a letter to the leaders of the Joint Government and Financial Services House Allocation Subcommittee, urges colleagues to withhold IRS funds to block state-level SALT cap solutions.
Signed by Representative Josh Gottheimer, DN.J.; Tom Malinowski, DN.J.; Katie Porter, D-Calif; and Tom Suozzi, DN.Y., letter requesting the addition of a provision to the bill for the fiscal year 2023.
The letter specifically points to legislation passed in New York and New Jersey allowing local jurisdictions to create charities that provide property tax credits to homeowners who have contributed. The law would allow itemized taxpayers to request a charitable write-off of their contributions.
However, the IRS and the U.S. Department of the Treasury banned this solution in 2019says that receiving a SALT credit in return for charitable donations constitutes a “quid pro quo”.
“Congress did not allow the IRS to interpret tax law as it saw fit, which it did by eliminating the charitable tax deduction,” said Gottheimer, co-chair. SALT Caucus.
“We must do everything we can, including reinstating the SALT deduction, to help cut taxes and make the lives of families and small businesses more affordable,” he added.
$10,000 SALT limit issued by former president Donald TrumpThe signature tax overhaul, which has been a hit for high-tax states, such as New York, New Jersey, and California, because residents can’t deduct more than $10,000 in state and local taxes on their federal returns.
With a slim Democrat majority, the SALT cap was a big issue in the Build Better Back negotiations and lawmakers in November passed $80,000 SALT limit until 2030 as part of their spending package. But Sen. Joe ManchinDW.Va., blocked the plan in the Senate.
The push for SALT reform faced another obstacle in April when Supreme Court rejects a challenge from New York and three other states to overturn the law.
Garrett Watson, senior policy analyst at the Tax Foundation, described the latest move from advocates of the SALT relief as “an interesting approach” but expected opposition from lawmakers. Dharma on both sides of the aisle.
“Allocation season is inherently a rather tumultuous time for both parties,” he said, pointing to ongoing disagreements over IRS funding and the agency’s direction.
Another concern may be the types of taxpayers trying to take advantage of state-level SALT tax rate cap solutions, who are often “on the more complex side, which can be correlated with income”, Watson said.
Current alternatives in some states available only to so-called transitional businesses, with profits flowing into the owners’ personal tax returns. Opponents of the SALT bailout have long argued that raising the ceiling could primarily benefit wealthy households.
If repealed altogether, the top 20 percent of taxpayers could get more than 96 percent of the relief, according to the Tax Policy Center. reportaffects only 9% of American households.