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Just like sand in an hourglass, prospects for SALT cap relief are dwindling down.
The good news is that the infamous $10,000 cap will expire on its own after 2025. All of a sudden, that doesn’t seem all that far away. Must be something about time marching on.
Let’s go back to 2017 and the Trump Administration’s tax reform package. Among other things – a higher standard deduction, a much lower corporate tax rate – the plan imposed a $10,000 cap on deductions for state and local taxes. Previously, deductions for what has become known as SALT were unlimited. This meant nothing to most homeowners across the nation, but it meant a lot to many in New Jersey, some of whom pay much more than $10,000 in local property taxes alone.
Some New Jersey House Republicans voted against the entire tax package because of the cap.
But it was Democrats – not surprisingly – who made it a big issue in the 2018 midterms. That was a good strategy as Dems “flipped” four seats.
The sobering news was that attempts by the Democrats in the House to get rid of the cap failed. While the then-Democratic House passed multiple bills to eliminate the cap, it got nowhere in the Senate.
Admittedly, it’s hard to convince people in the south and midwest that those living in $300,000 homes in New Jersey need tax relief. We know that a $300,000 home is very much an average home, but that argument is not persuasive to representatives from such places as North Dakota and Tennessee.
Things got harder when Republicans took control of the House last fall.
There are some Republicans from New Jersey, New York and other high-cost states who would join many Democrats in eliminating the cap, but their efforts have not been rewarded.
Just ask Rep. Josh Gottheimer from CD-5 after the House Ways and Means Committee refused to restore the full SALT deduction when considering tax legislation earlier this week. Here’s his not too happy take:
“The Moocher States are rising again – expecting to line their red state pockets with federal tax dollars paid by blue states. Today, extremists on the House Ways and Means Committee refused to restore the SALT deduction. That is an insult to millions of hard-working middle-class families who continue to face double taxation and higher taxes – and it’s an insult to all the Democrats and Republicans who represent blue states.
“I helped pass four bills out of the House to restore SALT and help cut property and state taxes for Jersey families. But all four times, the Senate red staters blocked the tax-cutting legislation. I’m sick and tired of these red states treating New Jersey and other blue states like their piggy bank. We’re paying everyone else’s tab for their roads, bridges and law enforcement.”
Gottheimer’s statement included comments from Janet Yellin, the U.S. Treasury Secretary, that SALT has had a “disparate impact on different states.”
One guesses the challenge now is to make sure the SALT deduction cap is not extended beyond 2025.
U.S. Rep. Bill Pascrell, Jr. (D-9), New Jersey’s only member of the tax-writing House Ways and Means Committee, offered the amendment during a committee hearing to provide relief from the burdensome state and local tax (SALT) deduction cap imposed by Republicans in 2017. The SALT amendment Pascrell offered was modeled after H.R. 3098, a bill authored by several New York and California Republican congressmembers. Ways and Means Republicans voted against their plan, blocking and killing Pascrell’s amendment.
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