Democrats Want Increased SALT Deductions Rep. Tom Suozzi, D-N.Y., speaks at the podium standing with members of the Problem Solvers Caucus in a press conference outside the U.S. Capitol on Dec. 21, 2020, in Washington, D.C. (Cheriss May/Getty Images)
By David Volz | Thursday, 24 June 2021 10:22 AM
Democrats are contemplating changing the law to allow Americans to deduct more of their state and local taxes (SALT) from their federal returns as part of a large economic program to help states with high taxes.
House Democrats, mostly from New York and New Jersey, want to lift the SALT cap and claimed Wednesday the deduction is progressive and that the $10,000 cap created in 2017 Republican tax law hurts union members and the middle class. The SALT cap has been divisive for Democrats as liberals are against repealing the new limits because it would benefit the wealthy, while proponents say it would tax the rich and help groups such as teachers and firefighters, according to NBC News.
The Tax Policy Center has said that if the SALT cap were to be completely repealed, 70% of the benefits would go to people with incomes above $500,000 and that most middle income people would not benefit.
Democrats whose districts have been hit hard by SALT say the deduction would actually make it easier for states to tax the wealthy and use the money deliver government benefits, including to those in unions. And they want union leaders to promote this message.
Ed Kelly, president of the International Association of Firefighters which includes 285,000 firefighters and medical personnel among its members, joined 10 Democrats, led by Rep. Tom Suozzi, N.Y., Mikie Sherrill, N.J., and Lauren Underwood, Ill., in advocating for the SALT limit change. "It really put an unfair burden to all our cities and towns across the United States. It put a lot of stress and strain on our ability to protect you, to educate your children, to take care of our most vulnerable, like our elderly," he told NBC News.
Sen. Bernie Sanders, I-Vt., the Budget Committee chair and a leader on the legislation, proposed $120 billion for SALT relief over five years. One idea included in the draft legislation would be to eliminate the cap for individuals making less $400,000 or less annually. "No SALT, no deal," said Suozzi.
SALT is a federal tax reform bill passed in 2017 that established a new limit on the amount of state and local taxes that can be deducted on a federal income tax return. Starting in 2018, the itemized deduction for state and local taxes paid was capped at $10,000 per return for single filers, head of household filers and married taxpayers filing together.
Some states have passed new laws allowing taxpayers to make charitable contributions to government funds in exchange for state tax credits. If allowed, these creditable deductions can enable taxpayers to convert some of their lost SALT deductions to charitable deductions which are usually fully deductible for individuals who itemize on their federal return, according to HR Block.