Bill Morris in Legal/Financial on April 23, 2021
U.S. Rep. Tom Suozzi is leading a bipartisan group of House Democrats and Republicans from high-tax states who have an ultimatum for President Joseph R. Biden: We’ll support your ambitious $2.25 trillion infrastructure bill – but only if you reinstate the full deduction for State and Local Taxes (SALT). Suozzi has put the ultimatum succinctly: “No SALT, no deal.”
Suozzi, a Democrat whose district stretches from northeastern Queens along the north shore of Long Island, says the SALT Caucus he co-chairs has enough support to block Biden’s infrastructure bill unless House Speaker Nancy Pelosi can broker a deal. All but two members of the New York House delegation have signed on. “The bottom line,” Suozzi said in an interview with Habitat, “is that the Democrat majority in the House is so narrow that every vote counts. All we need is three Democrats to vote with us.”
Suozzi’s SALT Deductibility Act now has 108 co-sponsors in the House, and Sen. Chuck Schumer, the majority leader, has introduced a similar bill in the Senate. Suozzi says the push to lift the SALT deduction cap has the support of the U.S. Conference of Mayors, the National League of Cities and numerous other groups.
The SALT deduction was capped at $10,000 under the 2017 Tax Cuts and Jobs Act. Under the pre-Trump tax code, taxpayers who itemized deductions on their federal income tax returns could deduct all of their state and local taxes, thus reducing their federal tax bite. Suozzi says Long Island residents averaged nearly $20,000 apiece in such deductions before Republicans capped them at $10,000. Nationwide, approximately 44 million Americans used to take advantage of the full deduction.
Rep. Josh Gottheimer, a New Jersey Democrat and fellow co-chair of the 40-member SALT Caucus, says the $88.7 billion of lost revenue from lifting the SALT cap could be offset by cracking down on tax cheats. Gottheimer tells Bloomberg News that increasing funding for the Internal Revenue Service to boost enforcement efforts could yield enough money to pay for reinstating the full SALT deduction as well as a portion of Biden’s infrastructure package.
Critics have charged that repealing the SALT cap will primarily benefit wealthy taxpayers. Suozzi disputes the charge. “The definition of wealthy is different in different parts of the country,” he says. “If you make $100,000 or even $150,000 in New York, you’re not rich. I know plenty of carpenters and electricians on Long Island who need this deduction. Besides, it’s not fair to tax people on taxes they’ve already paid. We’re chasing people out of New York, especially rich people. If all the rich people leave, who’s going to be left holding the bag? The middle class and the poor.”
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