Advocates for state and local tax (SALT) reforms once again find themselves in the throes of disappointment as the SALT Marriage Penalty Elimination Act was met with rejection in the House of Representatives on Wednesday. The bill, spearheaded by Representative Mike Lawler (R.-N.Y.), aimed to ameliorate the tax burden on married filers in high-tax states, such as New York, by proposing an increase in the tax cap and providing relief for residents affected by the 2017 tax bill.
Despite its bipartisan support and pleas for unity, the bill failed to secure the necessary agreement in a procedural vote, underscoring the persistent challenge of bridging the gap on SALT reforms. The defeat, with a final tally of 195-225, is the latest in a series of unsuccessful attempts over recent years to address the limitations imposed by the 2017 tax legislation.
The roots of the SALT issue trace back to the tax bill championed by then-President Trump, which capped the SALT deduction at $10,000. While presented as a cost-saving measure, the move was widely perceived as targeting Democratic-leaning states with high local tax rates, including New York, New Jersey, and California. Advocates for SALT reforms have been pushing for a full or partial restoration of the deduction, arguing for a more equitable tax structure.
The SALT Marriage Penalty Elimination Act, while not offering a complete restoration, sought to ease the burden on some married couples by raising the cap to $20,000 for the 2023 tax year, provided the taxpayers’ adjusted gross income is less than $500,000. The rejection of this bill, despite its bipartisan backing, reflects the ongoing divide on the SALT issue, which does not strictly align with party lines but instead highlights the disparities between states with varying concerns and priorities related to the deduction.
This week’s vote followed a bipartisan tax bill announced in January, which notably lacked provisions addressing the SALT issue. Representatives from high-tax states, including New York, expressed their concerns and threatened to block the bill. While amendments were not made to the bipartisan package, high-tax state representatives secured a vote on the SALT Marriage Penalty Elimination Act.
The defeat of the bill this week underscores the complexities and challenges of SALT reform, with implications for residents and policymakers in high-tax states. Despite setbacks, members of Congress supporting SALT reforms, including the SALT Caucus, are expected to persist in their efforts to restore the deduction. The ongoing struggle to address the SALT issue highlights the intricate political dynamics surrounding tax reform and the ongoing debate over equitable tax policies.
