Legislation Introduced to Restore Federal SALT Deductions

Representatives Thomas Suozzi (D-NY-3) and Peter King (R-NY-2) have introduced bipartisan legislation to reverse the impact of last year’s tax overhaul, which eliminated the deduction of state and local taxes from federal filings. If passed, people who live in high-salary, high-tax areas, such as Long Island would regain write-offs plus other benefits. 

“The SALT cap was particularly unfair to Long Islanders and New Yorkers because they already subsidize other states by paying $48 billion more into the federal government than we receive back,” Suozzi said in a statement. “It is a tax on taxes already paid, and it hits the homeowners whose local taxes fund police, firefighters and other services.” 

The legislation, called the Restoring Tax Fairness for States and Localities Act, would eliminate the marriage penalty by doubling the cap to $20,000 for joint filers for 2019 and would fully restore state and local tax (SALT) deductions for 2020 and 2021. 

The cost of the plan would be fully offset by returning the top individual tax rate from 37 percent, back to 39.6 percent, the number prior to the GOP tax bill of 2017.   

Suozzi’s district includes parts of Queens and extends into Nassau and Suffolk counties, mainly along the North Shore and includes parts of Kings Park.  In the region, more than 250,000 families reportedly have claimed the SALT deduction at an average rate of $18,300. Capping the deduction has cost Long Islanders, and all New Yorkers, billions in additional taxes, according Suozzi. In fact, Suozzi reports that the average SALT burden statewide is above the $10,000 cap in 52 of 62 counties.

“Eliminating deductions for local and state taxes will have a devastating effect on New York. We give far more to Washington than we get back. For every dollar we give, we get $0.79 back. That’s a $48 billion shortfall and hurts our middle-class Long Islanders. This legislation is critical,” Rep. King said in a statement. 

Some elected officials are skeptical of the legislation. 

Earlier this year, Rep. Lee Zeldin (R-NY-1) introduced legislation that would fully reinstate SALT reductions and also close previously unaddressed loopholes. He said he prefers that to raising the individual tax rate. 

“The issue Congressman Zeldin has with this new proposal by Representative Suozzi and others is that it permanently raises the 37 percent individual tax rate to 39.6 percent and only temporarily makes changes to the SALT deduction until 2021,” said Katie Vincentz, Zeldin’s spokesperson. 

Zeldin, Vincentz said, would be happy to work with Suozzi and King to fix the current proposal and reiterated that the legislation Zeldin introduced would permanently reinstate the deduction without raising individual income taxes.

The Restoring Tax Fairness for States and Localities Act was approved in the House Committee on Ways and Means Dec. 10. 

“In the midst of all the battles in Washington, D.C., I know that my constituents on Long Island want tax fairness. The 2017 cap on SALT broke a century-old agreement. A covenant to protect state and local government and my bill restores that protection, it restores that covenant, and it restores fairness as well,” said Suozzi. “I thank Chairman Neal and the Ways and Means Committee for passing my bipartisan legislation and I hope it will be passed by the House of Representatives in short order.”