Proposed House Bill Would Eliminate State and Local Tax Deduction Cap

House Democrats have proposed a bill that would remove the $10,000 cap on state and local tax (SALT) deductions. Called the “Restoring Tax Fairness for States and Localities Act,” the bill would increase the cap to $20,000 for married filing joint taxpayers for the 2019 season, then eliminate the cap entirely in 2020 and 2021. The proposed legislation would offset the substantial revenue loss by restoring the pre-Tax Cuts and Jobs Act (TCJA) top individual tax rate of 39.6 percent and lowering the income threshold at which that top rate applies. 

If policymakers intend to extend the cap repeal beyond 2021 without increasing deficits, it appears additional income offsets would be required. Under the Ways and Means bill, the offsetting changes to the top rate would be in effect from 2020 through 2025 – even though the restoration of the deduction is in effect only through 2021 – after which the major individual tax provisions of the TCJA are scheduled to expire altogether. 

Reps. Thomas Suozzi (D-N.Y), Bill Pascrell (D-N.J.) and Mike Thompson (D-Calif.) sponsored the bill, which was scheduled to be marked up by the Ways and Means Committee yesterday. Given that Congress is set to break soon, it doesn’t seem likely there will be much movement on the bill until next year. Even then, with the Senate controlled by Republicans, it seems unlikely that a bill would get through given the need to increase tax rates to accommodate the increase in the SALT deduction cap.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Pennsylvania 2021-2022 Budget Expands the Educational Improvement Tax Credit Program
Ohio Update on the Unemployment Benefits Exclusion for Taxpayers Who Filed Prior to the Enactment of the American Rescue Plan Act
Ohio Sales Tax Holiday 2021
Florida Enacts Sales and Use Tax Economic Nexus
Nonresident Taxpayers May Be Eligible for Refunds of Ohio Tax for Gain on the Sale of a Business Interest
Is Your Association Required to File a Pennsylvania Decennial Report?
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×