Rep. Tom Malinowski is renewing efforts to get the state and local tax (SALT) deduction reinstated.
Malinowski, along with Rep. Katie Porter (D-CA), introduced the Supporting Americans with Lower Taxes (SALT) Act to provide relief to middle class families residing in states with a high cost of living. The bill would fully restore the SALT deduction for Americans making less than $400,000 a year, while increasing the deduction cap for those making between $400,000 and $1 million.
In a bid to gain support, the two Democrats are proposing using revenue raised from their proposal to fund hearing and vision care through Medicare.
Restoring SALT Deduction
“When I first ran for Congress, I promised to right the wrongs of the 2017 GOP tax bill by restoring the SALT deduction for my middle-class constituents,” said Malinowski. “This is a win-win approach that we hope will produce compromise on the SALT issue.”
The North Jersey Congressional delegation have made the repeal of the deduction cap since 2017 a top priority. Then President Donald Trump signed a tax law that imposed a $10,000 cap on the SALT deduction through 2025. Critics, mostly Democrats from such states as New Jersey, California, New York and Illinois, have argued the cap discriminates against taxpayers who earn the same incomes based solely on where they live, and punishes states where residents have chosen to pay for better schools and services with higher state and local taxes.
The SALT Act being proposed would eliminate the deduction cap for single or joint filers that make under $400,000. For filers making $400,000 and above, the SALT deduction cap would start at $60,000 and the cap would then be reduced at a rate of $10,000 for each $100,000 of income in excess of $400,000.
The proposed legislation would require all tax filers claiming SALT deductions to attest that their total assets do not exceed $1 billion.
“Middle class families…have been feeling the squeeze, and the Trump tax law’s cap on the (SALT) deduction has made it worse,” said Porter. “Our tax code should provide a level playing field across states, not punish some Americans for living in regions with high costs of living. Our SALT Act will restore fairness to our tax code, with sensible guardrails to prevent abuse by the ultra-wealthy.”
A new wrinkle to past actions to repeal the cap, revenues raised by the bill would be allocated to a new Medicare vision and hearing trust fund. The lawmakers noted The Tax Foundation estimates that the bill would raise $150.9 billion over ten years compared to the status quo policy of maintaining a $10,000 cap through 2025, and then letting it expire entirely.
The amount to fully cover the cost of creating a Medicare hearing and vision benefit is estimated at $119 billion over ten years, $30 billion for vision coverage and $89 billion for hearing services.
“The proposal Representative Porter and I are putting forward would (restore the SALT deduction), while remaining fiscally responsible and delivering a new Medicare benefit that our seniors have long been waiting for,” said Malinowski.
Slated to be included in the Build Back Better Act last year, Malinowski along with Reps. Josh Gottheimer, Mikie Sherrill, and Bill Pascrell had pledged to withhold their votes if SALT relief was not produced. The matter was never resolved as the U.S. Senate could not come to an agreement on the legislation.