NY Republicans push for swift passage of bill expanding SALT deduction
The House Rules Committee Advances Legislation to Expand Federal Deductions for State and Local Taxes
The House Rules Committee has taken a significant step forward in advancing legislation that would expand federal deductions for state and local taxes paid. This measure, negotiated by New York Republicans, is a result of their support for a broader tax legislative bill.
Modified SALT Legislation Moves Forward
The Rules Committee has reported out a rule to allow for consideration of the SALT legislation on the floor. This bill is a modified version of Rep. Mike Lawler’s SALT Marriage Penalty Elimination Act, which aims to change the structure of the SALT cap by doubling it for married joint tax filers.
The bill received an 8-5 vote in favor as it was reported out of the Rules Committee. While the exact timing of a floor vote in the broader House is uncertain, sources familiar with the matter expect it to take place next week.
This Rules Committee hearing took place less than 12 hours after the House passed a child tax credit plan: impact on families”>bipartisan child tax credit and business bill with an overwhelming 357-70 vote.
Some centrist Republicans from New York expressed their dissatisfaction with the absence of a change to the SALT cap in the broader tax bill. In protest, they threatened to sabotage an unrelated procedural vote. To secure their support, House leadership allowed the SALT sidecar bill to move forward.
Addressing Unfairness in the Current SALT Arrangement
Under the 2017 Republican tax overhaul, the federal deduction for SALT was capped at $10,000 for both individual and married filers. Lawler’s bill seeks to raise the deduction to $20,000 for married couples who own a home and file jointly.
Members of the SALT caucus argue that the current arrangement is unfair, as single homeowners can claim a $10,000 deduction, while married couples can only claim $5,000 due to filing jointly.
The proposed $20,000 threshold would apply to joint filers with an adjusted gross income of less than $500,000.
During the hearing, Rep. Lawler emphasized the urgent need for tax relief due to the economic challenges caused by the Biden administration. He highlighted the crippling effects of inflation, skyrocketing living costs, and soaring energy prices.
The fate of the bill in the House remains uncertain, given the tight division among lawmakers. While many Republicans oppose changes to the SALT cap, viewing it as a tax break for the wealthy, numerous Democrats from high-tax states support raising or eliminating the cap.
The broader tax package, passed on Wednesday night, includes the expansion of the child tax credit, a long-standing Democratic priority, and the renewal of certain business tax deductions advocated by Republicans.
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The $78 billion bill enhances the child tax credit by making it more generous on a per-child basis, increasing the maximum refundable amount per child, and indexing the credit for inflation in 2021 and 2025.
As the broader package faces uncertainty in the Senate, lawmakers, mindful of the upcoming election year, will carefully scrutinize the legislation. If the tax package successfully passes the Senate, President Joe Biden has indicated his willingness to sign it into law.
What is the main concern raised by taxpayers in high-tax states regarding the current SALT arrangement?
The current SALT (state and local taxes) arrangement has been a point of contention for many taxpayers, particularly those in high-tax states such as New York. Critics argue that the existing cap on SALT deductions unfairly penalizes these taxpayers by limiting the amount they can deduct on their federal tax returns. This modified SALT legislation, proposed by Rep. Mike Lawler, seeks to address this unfairness by doubling the SALT cap for married joint tax filers. By allowing these taxpayers to deduct a larger portion of their state and local taxes, this bill aims to alleviate some of the tax burden and provide much-needed relief for families in high-tax states. The fact that this bill received an 8-5 vote in favor from the House Rules Committee demonstrates the support it has garnered among lawmakers. This bipartisan support is crucial in advancing the legislation and increasing its chances of becoming law. The timing of a floor vote in the broader House is still uncertain, but sources familiar with the matter anticipate it will take place next week. This indicates that there is a sense of urgency among lawmakers to address the issue and provide relief to taxpayers as soon as possible. It is worth noting that this Rules Committee hearing occurred shortly after the House passed a bipartisan child tax credit and business bill with an overwhelming vote in favor. This suggests that lawmakers are actively working towards finding common ground and passing legislation that benefits the American people. However, it is not without its controversies. Some centrist Republicans from New York expressed their dissatisfaction with the absence of a change to the SALT cap in the broader tax bill. To express their discontent, they threatened to sabotage an unrelated procedural vote. In order to secure their support, House leadership allowed the SALT sidecar bill to move forward. This compromise highlights the importance of finding middle ground and making concessions to achieve bipartisan support. Overall, the advancement of this legislation to expand federal deductions for state and local taxes is a significant step towards providing relief for taxpayers in high-tax states. By addressing the unfairness in the current SALT arrangement, lawmakers are working towards creating a more equitable tax system. While the exact outcome of the floor vote remains uncertain, the support and momentum behind this bill suggest that it has a good chance of becoming law and bringing much-needed relief to American taxpayers.
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