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December 14, 2021 at 10:13 PM
Members of Congress have been debating the cap on the federal income tax deduction for state and local taxes (the SALT cap) since the Tax Cuts and Jobs Act of 2017 was signed into law. Now, two competing proposals are making their way through the House and Senate.
Under the House version, the current $10,000 cap would be raised to $80,000, so that taxpayers could claim a federal tax deduction for up to $80,000 in state and local taxes (the cap would revert back to $10,000 in 2031 absent further action).
Under the Senate version, the cap would remain at $10,000. A new exemption, however, would apply for taxpayers with income under a threshold (somewhere between $400,000 and $550,000). Both plans are designed to avoid adding to the federal deficit.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about which of the two SALT cap proposals they favored.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Bloink
Byrnes
Their Reasons:
Bloink: Each of these proposals is a step in the right direction if we’re focused on ensuring that middle-class taxpayers aren’t suffering because of the GOP-imposed SALT cap — but we can’t implement both.
I tend to favor the proposal to raise the cap from $10,000 to $80,000. Putting a firm cap on the actual state and local taxes that can be deducted considers both a taxpayer’s income (in terms of state income taxes paid) and assets (in terms of state real property taxes paid).
Byrnes: If we’re looking to minimize the impact on middle-class Americans, we should have a version of the SALT cap that draws the line based on income. The Senate approach, which would apply the SALT cap only to taxpayers earning above certain threshold amounts, is a much more targeted approach that avoids big giveaways to those we aren’t intending to benefit.
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