Gov. Phil Murphy is heading a group of six other Democratic governors in a bid to lift the $10,000 Trump-era cap on state and local property tax deductions.
The effort comes days after several members of the New Jersey Congressional delegation said they would not support any of President Joe Biden’s proposed tax increases or other such changes unless the SALT cap is lifted.
“Like so many of President Trump’s efforts, capping SALT deductions was based on politics, not logic or good government,” reads the letter to President Biden, dated April 2. “This assault disproportionately targeted Democratic-run states, increasing taxes on hardworking families.”
In addition to Murphy, the letter was signed off by New York Gov. Andrew Cuomo, Connecticut Gov. Ned Lamont, Illinois Gov. J.B. Pritzker, California Gov. Gavin Newsom, Oregon Gov. Kate Brown and Hawaii Gov. David Ige.
Typically referred to as the SALT cap, the provision was tucked into the Trump-era federal tax cuts in 2017, and limits homeowners from claiming more than $10,000 in state and local taxes when filing their income taxes each year.
It’s been blasted by representatives from higher tax, typically Democratic states like New Jersey and neighboring New York, where the annual property tax bill could be more than double the federal cap.
House Democrats have tried since 2018 to have the cap lifted, but those efforts have been blocked in the previously Republican-led U.S. Senate.
“The negative impacts of the SALT cap on middle-class families are particularly egregious when you consider that in the states most affected by this cap, the federal government already takes more in federal taxes than the states receive in federal support, effectively subsidizing federal payments to other states,” the letter continues.
The letter estimates that the $10,000 cap has cost New Jerseyans another $3 billion in annual taxes. In 2018, the nonprofit Tax Policy Center estimated that completely repealing the SALT cap would cost the federal government $620 billion of tax revenue between 2018 and 2028.
Last month, U.S. Treasury Secretary Janet Yellen signaled a willingness toward working with Congress to either partially or completely lift the $10,000 cap. It’s not been included in any of Biden’s proposed COVID-19 relief efforts.
Still, New Jersey Reps. Josh Gottheimer and Bill Pascrell said they would not support any of Biden’s proposed tax increases or changes with a total repeal of the SALT cap.
Biden has proposed some of the largest tax increases on corporations in decades, in order to finance large swathes of his landmark $2 trillion infrastructure proposal. That’s drawn fierce scorn from Republican lawmakers on Capitol Hill.
“We will not accept any changes to the tax code that do not restore the SALT deduction and put fairness back into the system,” Gottheimer and Pascrell said in a March 30 joint statement, along with New York Rep. Tom Suozzi.
