Trump signs sweeping tax bill into law
President Donald Trump said Wednesday that he is open to revisiting changes to a state and local tax deduction that Republicans in Washington enacted in 2017 and were projected to cost California taxpayers an extra $12 billion.
“There are some people from New York who have been speaking to me about doing something about that, about changing things,” the president told a small group of regional reporters at the White House. “I’d be open to talking about it.”
Until last year, taxpayers could deduct their state and local tax payments from their federal income taxes if they itemized their deductions. Republicans’ 2017 tax overhaul, however, capped the deduction at $10,000, which primarily affected wealthy individuals in high tax states like California, New York and New Jersey.
According to California Franchise Tax Board, approximately 2.6 million taxpayers deducted more than the $10,000 limit in state and local taxes in 2015. Of that group, about 1 million were projected to owe more in taxes in 2018 — to the tune of $12 billion. About $9 billion of that will be paid by about 43,000 Californians who make $1 million or more.
But some middle-class taxpayers are likely to pay more, too. According to tax board estimates, 751,000 California households with incomes under $250,000 will probably owe a combined $1.1 billion. And given the high cost of living in the state, $250,000 does not feel like nearly as much money as it does in other parts of the country.
That prompted lawmakers in California and elsewhere to press a change to the law. Leading the charge on legislation to renew the full SALT deduction is New Jersey Rep. Bill Pascrell, a senior Democrat on the powerful Ways and Means tax writing committee. He told McClatchy in December it was “a priority” for the committee under the new Democratic majority in the House.
Some Republicans, like Lee Zeldin and Peter King of New York, also support reinstating the deduction.
The issue could split Democrats as well as Republicans. There’s a perception, which Trump reiterated Wednesday, that the change to the deduction only “affects wealthy people.” Democrats from parts of the country with low taxes may prefer to keep the cap on SALT and give tax cuts to other groups of Americans.
While the president didn’t rule out amending the SALT cap, he also defended the concept behind it. “It makes all states the same,” he argued.
Pascrell, for one, remains skeptical that Trump is willing to re-open the debate on SALT, which was one of the most contentious elements of the 2017 tax code rewrite.
“Is he serious? He signed that God-awful tax cut for his rich cronies that targeted states like our New Jersey for revenue,” Pascrell said in a statement provided to McClatchy. “The SALT cap is hurting middle-class families in New Jersey, hurting the housing market, and imperiling local communities’ finances. If Trump is truly interested in fixing SALT, he can start by supporting a bipartisan bill I’ll be introducing with my colleagues very shortly.”
Emma Dumain contributed to this report.