According to a recent Bloomberg article, HILL TAX BRIEFING: House Tax Writers Consider SALT Change Today, several members of the House Ways and Means committee will be meeting soon to discuss the $10,000 limit on the State and Local Tax itemized deduction that was adopted as part of the Tax Cuts and Jobs Act of 2017.
As the article points out, some House members favor a repeal of the $10,000 SALT itemized deduction limit as set forth in proposed legislation in February of this year. It should be noted that this proposed legislation would also “restore the 39.6 percent individual tax rate bracket.”
The article also indicates that other members have stated that the cost of repealing the $10,000 SALT itemized deduction limitation could be offset by raising the corporate tax rate to 25% from 21% and the top income tax rate bracket to 39.6% from 37%.
The article highlights two representatives, Representative Bill Pascrell (D-NJ) and Representative Tom Suozzi (D-NY) in their efforts to address this issue. According to the Tax Foundation’s 2019 State Business Tax Climate Index, the four lowest ranked states for business taxes are Connecticut, New York, California and New Jersey. These four states are also ranked 43rd, 48th, 49th and 50th respectively by the same index for the Foundation’s Individual Tax ratings. The pending discussions about the $10,000 SALT limitation is quite important to individual taxpayers in those states. So it is not surprising that Pascrell and Suozzi are taking up this issue.
At least one congressman, Representative Pascrell, appears to be optimistic and is quoted in the article as stating “On the issue of the state and local taxes, we’re going to get to a compromise. I’m very positive.”
Not So Fast – Addressing The SALT $10,000 Limitation Viewed as a “Break for The Rich”
But not everyone in the House appears to be ready to compromise on this issue. As indicated in the article, the ranking GOP Ways and Means Committee member Kevin Brady (R-TX) does not yet appear to be on board and is quoted in the article as stating “such a break for the rich “isn’t something we’re interested in.” Furthermore, Brady added, “My first priority is making the tax cuts for families and small businesses permanent.”
The Take Away – “Blue” Taxpayers in Blue States Should Be Cautiously Optimistic
Just as one greets Fall with cautious optimism about the fun of the changing season, perhaps taxpayers may be pleasantly optimistic that our federal representatives can, as Representative Pascrell hopes, “get to a compromise” that will help taxpayers be less “blue” about the $10,000 SALT limitation.