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Law360 (April 3, 2020, 2:44 PM EDT ) Any additional legislation Congress prepares to mitigate the health and economic consequences of the novel coronavirus pandemic should include relief from the $10,000 cap on state and local tax deductions, House lawmakers representing New Jersey said Friday.
House Speaker Nancy Pelosi has already called for rolling back the federal cap on state and local tax deductions in Congress' next pandemic relief bill, and New Jersey legislators have sent her a letter emphasizing that idea. (AP)
The SALT deduction limits, passed in the 2017 federal tax overhaul, have been especially burdensome for high-tax states such as New Jersey, and the negative effects are exacerbated by the coronavirus outbreak, the lawmakers said.
"Relief from the unfair and destructive SALT cap offers the kind of action our constituents and states and localities can benefit from immediately," the lawmakers said.
One option for relief would be to include, in a forthcoming relief bill, legislation introduced by Pascrell and Rep. Tom Suozzi, D-N.Y., dubbed the Restoring Tax Fairness for States and Localities Act, or H.R. 5377, that passed the House in December.
That bill would double the $10,000 cap on income, property and sales tax deductions to $20,000 for married couples in 2019 and eliminate the cap entirely for 2020 through 2022. The bill would restore the top 39.6% individual tax rate, raising almost $191 billion between 2020 and 2027, according to a revenue estimate from the Joint Committee on Taxation. In total, the legislation would raise about $6.2 billion, according to the JCT.
That legislation could be changed and included in the next package to allow those who already filed their 2019 taxes an opportunity to amend their returns and claim additional deductions as a result of the lifted SALT deduction cap, the lawmakers said.
The letter followed Pelosi's call earlier in the week in an interview with The New York Times for a fourth coronavirus relief bill to roll back, at least in part, the $10,000 SALT cap enacted in the Tax Cuts and Jobs Act
.Following Pelosi's remarks, congressional Republicans on Tuesday shunned the idea, saying that half the benefits from repealing the $10,000 cap on state and local tax deductions would go to households in the top 1%.
A proposal to lift the cap could pass the House, but would face strong opposition in the Senate. Senate Finance Committee Chair Chuck Grassley, R-Iowa, has said he considers the idea a "nonstarter."
President Donald Trump signed into law on March 27 the latest legislative package designed to help struggling businesses meet payrolls, prop up state and local relief efforts, and provide direct payments to most Americans while they navigate the economic and health crisis brought by the coronavirus.
Pelosi's office didn't immediately respond to a request for comment.
--Additional reporting by Asha Glover and Stephen Cooper. Editing by Robert Rudinger.
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