WASHINGTON — An attempt by U.S. Sen. Charles Schumer, D-N.Y., to quash the Republican cap on state and local tax deductions, or SALT, failed Wednesday.
Schumer used the Congressional Review Act to force a vote on the Senate floor to eliminate an IRS ruling that nullified New York’s attempted workaround of the 2017 Tax Cuts and Jobs Act, which failed in a 52-43 vote.
The Republican tax bill capped the state and local tax deductions at the first $10,000, a threshold too low for some of the wealthier New York property owners.
In June, New York attempted to circumvent the cap with legislation that allowed local governments to set up charitable reserve funds that would give tax credits equal to 95 percent of a contribution. However, the IRS then issued regulations that block governments from giving tax credits for charitable contributions.
“The IRS’ harmful rule is just part of a cynical political game that needlessly hurts state tax credits in virtually every state impacting charitable contributions, education, home school, and many other areas,” Senate Majority Leader Schumer said in a statement Wednesday. “Taking away the SALT deduction was brutally unfair to New York’s hard-working homeowners who bear the brunt of the Trump tax bill.”
Schumer concluded that he would continue to search for ways to eliminate the SALT deduction cap.
The SALT deduction, which New Yorkers typically use to offset high state income and local property taxes, was targeted by the Trump administration and GOP after the 2017 tax bill lowered rates for corporations and people with high incomes.
New York, followed by New Jersey, Connecticut and Maryland, sued the Trump administration in July 2018, saying the cap unfairly targeted them because of their high property taxes.
“The federal government is hellbent on using New York as a piggy bank to pay for corporate tax cuts and I will not stand for it,” Gov. Andrew Cuomo said at the time of the lawsuit.
In 2016, residents of different New York counties received average SALT deductions ranging from $10,000 to $33,000.
Cuomo tried several actions since the law passed to minimize the effect the SALT provision would have on New York taxpayers, including allowing taxpayers to pay their 2018 property taxes before the start of the year so taxpayers could receive full deductibility this year.
The governor also pushed for, as part of his 2018 budget proposal, reforming the state’s income tax system to a payroll tax system — employers would pay taxes based on net wages paid and then deduct all of those taxes from their federal taxes — as well as creating charitable donation funds to avoid the effects of the tax law.
Massarah Mikati covers the New York State Legislature and immigration for Johnson Newspaper Corp. Email her at mmikati@ columbiagreenemedia.com or find her on Twitter @massarahmikati.