House Democrats on Thursday passed a bill that would ease the state and local tax deduction cap that shook the residential real estate market in New York and other high-tax states.
But the “Restoring Tax Fairness for States and Localities Act” has little chance of getting anywhere in the Republican-controlled Senate. The measure would increase the SALT cap to $20,000 from $10,000 for a joint return filed in 2019, and eliminate the cap for 2020 and 2021.
The bill was approved by a narrow margin of 218 votes to 206. Rep. Alexandria Ocasio-Cortez was among the few Democrats to vote against it.
The Bronx and Queens congresswoman has previously stated that SALT deductions disproportionately benefit the wealthy, including those who offset property taxes, according to the New York Daily News. The deduction was curtailed by the tax reform passed two years ago by congressional Republicans and signed by President Donald Trump.
But the bill passed Thursday by the House also calls for raising income taxes on the wealthy by raising the top marginal income-tax rate back to 39.5 percent. It was lowered to 37 percent in the same December 2017 tax reform that virtually eliminated the SALT deduction. (The reform raised the standard deduction to $24,000 for a married couple, making it unlikely that itemizing deductions would be worthwhile.)
In 2018, concern about how the SALT deduction cap would affect residential property sales swept through the industry. However, the chilling effect on buyers appears to be thawing, according to a recent report in The Real Deal.
In a statement, New York Gov. Andrew Cuomo applauded Thursday’s vote, arguing that it was time to “stop this double taxation scheme once and for all.”
“New Yorkers are sick and tired of being used as ATMs, footing an additional $15 billion each year that will be redistributed to red states and big corporations,” he said.
But Bloomberg calculated that about three-quarters of taxpayers with state and local taxes exceeding $10,000 were not even eligible to deduct them under the old law because these households were being hit by the alternative minimum tax instead. The federal tax reform mostly affected the top 1 percent of earners, who in New York account for 56 percent of state tax revenue, according to the Cuomo administration.
Rep. Peter King and Rep. Tom Suozzi (Credit: Getty Images)
The bill was carried by Republican Rep. Peter King and Democratic Rep. Tom Suozzi, both of Long Island.