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Democrats promise ‘meaningful’ relief for state and local tax deductions

Democrats promise ‘meaningful’ relief for state and local tax deductions

Representative Tom Suozzi, a New York Democrat, speaks at a news conference announcing the State and Local Tax (SALT) Caucus outside the U.S. capital, Washington, DC, on Thursday, April 15, 2021.

Sarah Silbiger | Bloomberg | Getty Images

The House Democrats have said they will pursue a “meaningful” $ 10,000 ceiling change on the federal state and local tax deduction known as SALT.

The controversial move is part of former President Donald Trump’s signature revision in 2017 and has been a pain point for Americans in high-tax states.

Since tax breaks and employment law, those who specify deductions can no longer deduct more than $ 10,000 in property and state income taxes on their federal returns.

While the Ways and Means Committee did not address SALT in its package of tax proposals, Chairman Richard Neal, D-MA, along with Rep. Bill Pascrell, Jr., D-NJ and Tom Suozzi, D-NY, a joint statement that they are “working daily” on the reform.

“We are committed to enacting a law that will include meaningful SALT relief that is so important to our middle-class society, and we are working daily toward that goal,” they said.

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While lawmakers are debating President Joe Biden’s agenda, lifting the SALT deduction limit has been a hotbed among lawmakers in high-tax states.

A group of moderate Democrats, mostly from New Jersey and New York, have said they will not support a bill unless it restores tax breaks.

“I have been consistent for six months: ‘No SALT, no deal,'” Suozzi said in a separate statement.

Although Democrats do not need Republican support to pass their $ 3.5 trillion spending bill, they must get votes from all Democratic senators and almost every House member.

However, the proposed repeal has received setbacks from lawmakers, who argue that the tax cut could primarily benefit the wealthy.

The top 20% of taxpayers can receive more than 96% of the benefit of a repeal of the SALT Act, according to a report from the Tax Policy Center, and only 9% of U.S. households can be affected.

In addition, the top 1% of households can receive 54% of the benefit with an average tax relief of $ 34,000.

Thanks to the SALT deduction, $ 77.4 billion brought in the first year it was introduced, according to the Joint Committee on Taxation. Removing the 2021 border could cost $ 88.7 billion and more in the coming years.

Meanwhile, an increasing number of states are now offering solutions on the SALT ceiling to passive business owners. These strategies may allow some businesses to circumvent the deduction limit by using a state tax to pay for some of the owner’s state income taxes.


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