House rejects an increase to the SALT cap
New York Rep. Mike Lawler, a Republican, sponsored the bill and argued that the SALT cap “disproportionately impacted high-cost states like New York, where the cost of living far exceeds the national average.” Tom Williams/CQ-Roll Call, Inc via Getty Images
Election-year politics derailed an effort to raise the amount in state and local taxes married couples could deduct. Local governments argued an increase in the cap would help “hardworking American families facing higher federal tax bills.”
A proposal that would allow married couples to deduct more of their state and local taxes from their federal taxes was blocked by a largely partisan vote in the House on Thursday when it became mired in election-year politics.
The bill’s sponsor, New York Rep. Mike Lawler, as well as local governments, have argued that raising a $10,000 cap on state and local taxes, or SALT, deductions to $20,000 would help people, particularly in states with high taxes, deal with rising prices.
Limiting the deductions, created as part of the 2017 federal tax overhaul, has “disproportionately impacted high-cost states like New York, where the cost of living far exceeds the national average,” Lawler, a Republican, said on the House floor.
Couples in his district, which includes Westchester and Rockland counties, need help after the monthly mortgage prices in the area increased by $1,000 in the past year. “These spikes in housing costs coupled with rising grocery prices are unsustainable for the average family, making tax relief essential,” he said.
But while raising the cap has had bipartisan support in the past, Democrats opposed allowing the SALT proposal to move forward this time, seeing it as a political maneuver to help Republicans in high-tax states like California and New York win reelection in November.
New Mexico Rep. Teresa Leger Fernandez, a Democrat, noted on the House floor that the cap would be raised for only this tax year, after Republicans voted against a Democratic amendment at a committee hearing two weeks ago to raise the cap for two years.
“They don't need it after November I guess,” Fernandez said. “They only need this for November. Once November goes by, your constituents don't need another year of tax relief with this deduction? This is all about politics and not about people.”
The measure failed to pass the procedural vote by 195 to 225, with 18 Republicans joining all 207 Democrats in opposing moving the bill forward. It marks the second time in two weeks that a proposal to raise the cap has failed, after lawmakers were unable to get it included in the tax package passed by the House on Feb. 1.
Raising the cap, however, has been a major priority for local governments. In a Jan. 17 letter to Congressional leaders, the National League of Cities and the National Association of Counties argued that “the $10,000 cap has resulted in many hardworking American families facing higher federal tax bills, leading to less disposable income for essential needs such as education, child care, health care and housing.”
Reducing the amount that can be deducted from federal taxes has led to people being “double taxed on the income they already used to pay mandatory state and local taxes,” wrote Clarence Anthony, CEO and executive director of NLC, and Matthew Chase, CEO and executive director of NACo.
The associations have also said reducing the deductions makes it politically more difficult for local governments to raise revenue by increasing their taxes. Raising the cap, they wrote, “will not only provide immediate relief to taxpayers but also enhance the ability of state and local governments to invest in our communities.”
Raising the SALT cap, though, was also opposed by the center-right Tax Foundation. The think tank said in a recent analysis that it would “make the tax code more regressive” because it would primarily benefit higher-income families in high-tax states who are more likely to itemize their tax returns. Lower-income families are more likely to take the standard deduction.
Rep. Nick Langworthy, a Republican representing upstate New York, said, “It's common to hear from those opposed to the SALT deduction that this deduction only benefits the very rich,” he said. “ But I encourage them to talk to police officers and firefighters living on Long Island and Nassau or Suffolk County, or middle-class families living in Southern California trying to pay their bills, put food on the table and ensure their children have a good life.”
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