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house Bill H.R. 4789

Should the Cap on the State & Local Tax Deduction be Eliminated?

Argument in favor

By limiting the state and local tax deduction, the GOP tax bill raised taxes on taxpayers who itemize in states with relatively higher tax burdens. The limitation should be eliminated so that taxpayers who itemize can deduct all of their state and local income and property taxes.

Leo's Opinion
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08/11/2018
We should not be taxed twice on the same income.
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Joanne's Opinion
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08/11/2018
Capping the deduction was a hate penalty by GOP. Hate toward Blue States and Middle Class. GOP motto: If you don’t do as we say, you will be punished!!!
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Countryfirst's Opinion
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08/11/2018
DO AWAY WITH YOUR DAMN TAX SCAM AND MAKE THE ELITE RICH PAY THEIR TAXES!!
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Argument opposed

The state and local tax deduction encourages state and local governments to raise taxes beyond what is necessary, because taxpayers claiming the deduction pay less in federal taxes so the true cost is hidden. Besides, fewer people will itemize with a higher standard deduction.

John's Opinion
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08/11/2018
Why should everyone in this nation SUBSIDIZE the few states where they’ve voted to have high taxes. If you live in a high tax state, simply vote in representatives that will vote for lowering those taxes. This is not about parties but simply fairness. You have a voice in taxes where you live....USE IT!
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Fg's Opinion
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08/12/2018
Hell no. Let the States cut spending. This cap gives the citizens incentive to elect non politicians to balance State Budgets
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ProudAmerican's Opinion
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08/12/2018
No absolutely not. This was a major offset and an important clause of the historic Tax Cut and Jobs Act of 2017. By the way for all the clueless and non working liberals out there, I am lower middle class and this law DID help me. Not only are my paychecks bigger, but all of my utility bills went down, my employer gave me a raise, and I was given a promotion. Thank God and thank President Trump for tax reform.
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What is House Bill H.R. 4789?

This bill — the Cutting Local Taxes by Reinstating SALT Act — would eliminate the cap on individual tax deductions for state and local taxes (aka SALT). The enactment of the Tax Cuts and Jobs Act capped the deduction at $10,000 per year for individuals or $5,000 for married individuals filing separate returns for tax years 2018-2025.

Impact

Taxpayers; state and local governments; and the federal government.

Cost of House Bill H.R. 4789

A CBO cost estimate is unavailable.

More Information

In-DepthSponsoring Rep. Josh Gottheimer (D-NJ) introduced this bill to remove the cap on the state and local tax deduction that was imposed with the enactment of the Tax Cuts and Jobs Act:

“The sole purpose for eliminating the State and Local Tax Deduction was an assault on New Jersey families and small businesses, while redistributing our hard-earned wages to Moocher States, such as Mississippi and Alabama. In Jersey, we don’t just take a punch and snake away into the corner. No, we stand up [and] fight.”

Original cosponsor Rep. Leonard Lance (R-NJ) added:

“No taxpayer should have to pay taxes on taxes. The state and local tax deduction should be restored in its entirety. It has been in the tax code since 1913 and is a matter of fundamental fairness under the concept of federalism.”

Critics of the state and local tax deduction argue that it encourages states and localities to impose higher taxes on their constituents because the deduction takes some of the financial sting out of higher state and local taxes by reducing federal tax liability. As Rachel Greszler, senior policy analyst in economics at the Heritage Foundation, wrote:

“Instead of having to pay the full cost of their taxes, state and local taxpayers who itemize their deductions can force taxpayers in lower-tax states to pick up a big portion — up to 40 percent — of their taxes. As a result, state and local lawmakers are quicker to raise taxes beyond the level that is needed to finance their essential services… If removing the property tax deduction (and other state and local tax deductions) would create a big burden for taxpayers in high-tax states, that’s a problem for state governments to address by lowering their tax burdens.”

Of NoteThe Tax Cuts and Jobs Act capped the state and local tax deduction at $10,000 for individuals and $5,000 for married couples filing separately, in part because the standard deduction was doubled to $12,000 for individuals and $24,000 married couples with joint returns — meaning fewer taxpayers would need to itemize and claim the deduction.

The state and local tax deduction can only be claimed by taxpayers who itemize their returns, so it generally benefits higher earning taxpayers. According to data from our partners at USAFacts, a non-partisan civic data initiative, the average tax savings from claiming the deduction per return in 2015 for taxpayers making less than $61,000 was $144; whereas taxpayers making more than $113,000 saved $1,569 on average and the top 1% of taxpayers saved an average of $21,723.

Several states have filed suit against the federal government over the state and local tax deduction cap, including New York, New Jersey, Connecticut, and Maryland. In 2017, data from USAFacts put the total amount of taxes deducted using SALT at $104.1 billion.


Media:

Summary by Eric Revell

(Photo Credit: iStock / cabania)

AKA

Cutting Local Taxes by Reinstating SALT Act

Official Title

To amend the Internal Revenue Code of 1986 to repeal the limitation on the deduction for certain taxes, including state and local property and income taxes.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Committee on Ways and Means
    IntroducedJanuary 12th, 2018
    We should not be taxed twice on the same income.
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    Why should everyone in this nation SUBSIDIZE the few states where they’ve voted to have high taxes. If you live in a high tax state, simply vote in representatives that will vote for lowering those taxes. This is not about parties but simply fairness. You have a voice in taxes where you live....USE IT!
    Like (47)
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    Capping the deduction was a hate penalty by GOP. Hate toward Blue States and Middle Class. GOP motto: If you don’t do as we say, you will be punished!!!
    Like (42)
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    DO AWAY WITH YOUR DAMN TAX SCAM AND MAKE THE ELITE RICH PAY THEIR TAXES!!
    Like (40)
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    Who really benefits from government spending? If you listen to Rush Limbaugh, you might think it was those blue states, packed with damn hippie socialist liberals, sipping their lattes and providing free abortions for bored, horny teenagers... As it turns out, it is red states that are overwhelmingly the Welfare Queen States. Yes, that's right. Red States—the ones governed by folks who think government is too big and spending needs to be cut—are a net drain on the economy, taking in more federal spending than they pay out in federal taxes. They talk a good game, but stick Blue States with the bill. It’s not just that some states are getting way more in return for their federal tax dollars, but the disproportionate amount of federal aid that some states receive allows them to keep their own taxes artificially low. As for me, as a WA resident, I would like to see a better ROI of the federal dollars WA gets. We need to focus hard on infrastructure and pollution. Specifically: the Quality of our Roads & Bridges, the Average Commute Time (in minutes), Parks & Recreation Expenses per Capita, our Water Quality and Air Pollution.
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    I live in a state that doesn’t get as much federal aid as other states so they are able to keep their state taxes lower. I shouldn’t get penalized for being in a higher taxed state.
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    The idea that high tax states - i.e. blue states - rely on the federal government more than low tax - i.e. red - states is demonstrably false. High tax states send more money to the federal government than low tax states which means we subsidize you. And now we are expected to pay more taxes so you low tax states can get a tax cut? That doesn't seem fair. https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
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    That Cap on the deduction was a GOP penalty. They were showing the Blue States and Middle Class that they were in charge & they screwed those states. .
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    Yes! There was no good reason to cap the state and local tax deduction at $10,000. It appeared to be an attack on states with higher taxes that didn’t support Trump.
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    Hell no. Let the States cut spending. This cap gives the citizens incentive to elect non politicians to balance State Budgets
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    Why and I being taxed 2x? In addition, why are those over 65, not working, being taxed? They’re paying taxes on income that was a tax!
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    This tax break was taken away from the hardworking middle class in order to give the wealthy 1% millionaires and billionaires a huge tax break. Give this tax break back to the hardworking middle class and make millionaires and billionaires pay their share. Millionaires and billionaires have profited greatly from our society and communities, let them pay their share to help maintain the services that make our society great. People cheer for Robin Hood, not King John. Stop taking from the poor and middle class in order to give to the rich. The rich are rich enough, but hardworking Americans are struggling. Let the middle class keep more of their money and make the rich pay their share.
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    No absolutely not. This was a major offset and an important clause of the historic Tax Cut and Jobs Act of 2017. By the way for all the clueless and non working liberals out there, I am lower middle class and this law DID help me. Not only are my paychecks bigger, but all of my utility bills went down, my employer gave me a raise, and I was given a promotion. Thank God and thank President Trump for tax reform.
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    Stop taxing your residents so much NJ. I thought the citizens of high tax states likes to pay more taxes so they can pay more for government programs? They’re the ones saying the rich should pay more right?
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    It amounts to an unfair tax on the large eastern cities.
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    Do not limit the amount of state/local tax that can be deducted. This was a measure to punish "blue" states, and it is unfair. I'm a Republican and even I can see that.
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    Taxation is theft. Let the people keep the money THEY earned. Agencies and projects should be funded through voluntary donations.
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    Jorge is right.....if you live in a high tax state, its because the Libs living there believe in big Gov’t. BIG G is the answer to all of their problems. Don’t expect me to share in the cost of your liberal ideas. By the way, don’t move to Florida with your BIG G ideas. NJ allowed all those casinos in their state and it’s now destroying the moral and economic fabric of their society.
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    I say we should bring back the 90% tax bracket that President Eisenhower instituted after WWII. That, plus eliminating the tax dodges which the Deadbeat Billionaire's Club use to avoid paying their fair share even at current rates, would solve most all of our national budgetary problems, and allow State taxes to drop to a manageable level even without deductions.
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    Capping deductions is a war on the middle class
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