The push to restore fully the state and local tax (SALT) deduction is moving forward in Washington.
Rep. Josh Gottheimer joined a bipartisan group of six other House members to introduce the SALT Deductibility Act, a bipartisan bill to fully restore the full SALT deduction. At the same time, Sens. Bob Menendez and Cory Booker are pushing forward with the bill in the U.S. Senate.
A pillar of U.S. tax policy since the Civil War, the SALT deduction allows taxpayers to write-off taxes paid at the state and local level from their federal income tax bill so they won’t be subject to being taxed twice on the same dollar.
The House proposal would allow taxpayers to fully deduct their state and local taxes on their federal income returns, which Gottheimer said would result in giving Northern New Jersey families a tax cut. In 2017, the deduction was capped at $10,000 and resulted in a tax hike for many middle-class families in the Garden State.
“Ever since New Jersey got absolutely whacked by the 2017 Tax Hike Bill, I’ve been fighting to fully reinstate our SALT deduction and to finally cut taxes for North Jersey families,” said Gottheimer. “With this new bipartisan legislation, both sides of the aisle are coming together to help reinstate a tax break for our hardworking, middle-class families, helping more Jersey residents through this pandemic. It’s time to finally get this done.”
Supporters of getting rid of the SALT cap deduction argue taxpayers in high cost of living areas— such as North Jersey—the cap has accelerated driving families to move other states, many of which are states subsidized by where their new residents have left.
GOP Rep. Smith Sponsors
“The arbitrary, unfair SALT caps place an unacceptable added burden on New Jersey taxpayers,” said Rep. Chris Smith (R-NJ), one of the cosponsors of the House bill. “Compared to what we get back, New Jersey already pays more than our fair share to the federal government. New Jersey residents—who have suffered so much, who have paid so much in taxes—both need and deserve this relief.”
The house bill has the backing of U.S. Conference of Mayors, the International Association of Firefighters, American Federation of Teachers, National Education Association and National Association of Police Organizations.
“Repealing the cap on state and local tax deductions will allow fire departments to have more budgetary freedom to focus on public safety needs,” said Harold Schaitberger, General President, International Association of Fire Fighters. “Current restrictions on SALT deductions have the potential to result in significant service reductions and negatively impact public safety in communities across America.”
Help to Cities
In a press conference in January, Paterson Mayor André Sayegh stated cities like his have been set back by the capping of the SALT deduction which historically strengthened state and local government functions, including public health programs, support for low-income residents, and emergency response services.
“This pandemic has taken a heavy financial toll on Paterson,” said Sayegh. “Our budget has been burdened. The SALT deduction has set us back.”
On the Senate side, Sen. Menendez, a senior member of the Senate Finance Committee that sets federal tax policy, argued the cap imposed by the Trump Tax Law of 2017 has disproportionately impacted New Jersey.
“By repealing the ill-conceived, partisan cap on SALT deductions, the SALT Deductibility Act will provide much-needed tax relief for hardworking, middle class New Jersey families,” said Menendez. “We need to put more money back in their pockets during this challenging time.“
New Jersey’s senior Senator noted allowing property taxes to be fully deducted has been a bedrock principle of the U.S. tax code and is a commonsense tax policy rewarding states who invest in education, public safety, and infrastructure.
“When Republicans jammed through the SALT cap, it unfairly and disproportionately hurt New Jersey taxpayers,” stated Menendez. “It’s time to right that wrong.”
Fairer Tax Code
The bill is led by Majority Leader Chuck Schumer (D-N.Y.) and builds upon previous legislation Menendez authored and Booker cosponsored in the last Congress to repeal the SALT cap.
“We should be building a fairer tax code that lifts up families, makes it easier for individuals in high cost-of-living states like New Jersey to afford homeownership, and allows communities to invest in education, public safety, and infrastructure,” said Booker.
“Hardworking families in states like New Jersey are still bearing the burden of the disastrous Trump tax cuts that gave handouts to wealthy corporations at the expense of the middle class.”