SALT deduction repeal unites Westchester Democrats but splits progressives
One congressman said that the wealthy would do particularly well with the SALT cap repeal, which he said could be countered by raising the top income tax rate from 37% to 39.6%.
David McKay WilsonTax Watch columnist David McKay Wilson delves into federal tax law changes on deducting state and local tax payments.
With the 2021 tax filing season in full swing, three members of the US Congress joined Westchester County Executive George Latimer on the front lawn of a Greenburgh homeowner to call for the repeal of the federal cap on the deductions for state and local taxes.
The cap, which was enacted in 2017 during Donald Trump’s first year in office, has hurt suburban homeowners – both those in the middle-class and the ultra-wealthy, who receive the SALT tax break’s biggest benefits.
Set up on the front lawn of a Greenburgh homeowner, Democratic Congressmen – Mondaire Jones, D-Nyack, Jamaal Bowman, D-Yonkers, and Tom Suozzi, D-Glen Cove – say the repeal would restore fairness to the federal tax code.
“We’re fighting mightily to get this repeal passed,” said Jones, in the front yard of Ayeshah and Brian Parker in Greenburgh’s Parkway Homes neighborhood.
Ayesha Parker, who has lived on Stone Avenue in Greenburgh with her husband for a decade, said the cap has driven up their federal tax bill for their family of six, which includes children aged 1 ,3, 6 and 8. Parker is a social worker at the North American Family Institute while her husband is a media specialist with the Bronxville schools.
“Our quality of life is burdened by this measure,” she said. “Restoring the deduction would make a difference to our household.”
But winning traction for the change in Washington, DC, has proven elusive.
The deductibility cap remains popular among Republicans, who say the tax break favors the wealthy Northeast and encourages more spending on the local level. Even some progressive Democrats, such as US Rep. Alexandra Ocasio-Cortez, D-Bronx, want to keep the cap because wealthy homeowners are those who benefit the most from the deductions for state and local taxes.
It's not uncommon for Westchester's upper-crust to pay more than $50,000 in property taxes, and there are a select number of Westchester's monied elite who pay more than $100,000 a year.
A 2020 study by the Brookings Institution found that if the cap was repealed, 57% of the benefits would go to the top 1% of homeowners, with average savings of $33,000. The top 0.1% of taxpayers would receive 25% of the benefits, with average tax savings of nearly $145,000.
SCHUMER: Bid to remove IRS rule on SALT cap fails
BLOCKED: IRS issues regulation to halt SALT cap workaround
PAULIN: Builds coalition to fight SALT cap
Bowman, a member of “The Squad” in Washington with Ocasio-Cortez and other progressives, has split with the left on this issue. He maintains that plenty of Westchester homeowners, like himself in Yonkers and the Parkers in Greenburgh, would have to pay less in federal taxes if the repeal occurs.
Ocasio-Cortez, who grew put in Yorktown, voted against the repeal in 2019.
“It would benefit homeowners in Yonkers as well as those in Bronxville and Scarsdale,” Bowman said.
Lawsuits on the cap in the spotlight
The revived attention on the SALT caps comes as federal judges in Manhattan weigh two lawsuits on the cap. One was filed by New York state, arguing that the cap violated the US Constitution. There’s another filed by Scarsdale and the town of Rye, as part of the Coalition for the Charitable Deduction, which have sued the IRS over its regulation that barred municipalities from setting up nonprofit charitable foundations to get around the cap.
Suozzi’s appearance in Westchester recalled his 2006 bid for the Democratic nomination for governor when he waged an unsuccessful primary campaign against Eliot Spitzer. Suozzi’s name has come up in discussions regarding a 2021 bid if Gov. Andrew Cuomo does not survive the current investigations into allegations of sexual misconduct and his handling of reporting on nursing homes death in the COVID pandemic.
Suozzi said the SALT cap reinforces New York’s position as a donor state, in that it provides more tax revenues to the federal government than it receives in federal benefits to its citizenry. He said he has 106 co-sponsors, including Jones, from as many as 12 other states. A similar bill was passed in 2019, but died in the Senate.
He’s hoping the SALT repeal gets folded into a broader federal funding bill that could be voted upon under reconciliation rules, which allow passage of a bill with a simple majority in the US Senate, as occurred with the recent COVID stimulus bill.
Suozzi acknowledged that the wealthy would do particularly well with the cap repeal, which he said could be countered by raising the top income tax rate from 37% to 39.6%.
“I won’t vote for any tax rate increase unless they restore the SALT deduction,” he said.
Follow David McKay Wilson on Facebook or Twitter @davidmckay415