The U.S. House of Representatives is poised to try again to allow taxpayers to deduct what they pay in state and local taxes from their federal income taxes.
H.R. 5377, cosponsored by U.S. Rep. Bill Pascrell (D-NJ) and approved last week by the Ways and Means Committee, would repeal the cap on State and Local Tax (SALT) deduction for 2020 and 2021. Pascrell was joined by New Jersey Gov. Phil Murphy in Saddlebrook earlier today to highlight the importance of the bill.
“Not only individual taxpayers have taken the hit, but the SALT cap forces our cities and towns into needlessly choosing between funding their schools, their roads, or their water services,” Pascrell said. “The legislation passed in the Ways and Means Committee will provide the significant and immediate tax relief New Jersey and tristate taxpayers have been rightly demanding. But this is only a first step, and we’re going to keep pushing until the legislation is approved by the full House, hopefully very soon.”
“We know this fight is far from over, and will continue to work in solidarity to restore full deductibility to residents in the 9th Congressional District, across the state of New Jersey, and in other states suffering under the current unfair tax law,” Murphy said. “I urge all members of the House of Representatives to pass H.R. 5377.”
The bill would actually make several changes to federal tax law, according to Pascrell’s office. It would eliminate the cap’s marriage penalty for 2019, enabling married taxpayers filing jointly to claim up to $20,000 in SALT deductions instead of the $10,000 limit, which applies to single and joint filers. It would also pay for the tax relief by restoring the top income tax rate of 39.6% from 37%.
In addition to providing SALT relief, the legislation will amend the U.S. Tax Code to allow first responders to take tax deductions for their uniforms and for tuition or related fees for professional development courses up to $500. Currently, first responders, including police, firefighters, and EMTs, often must pay for their own uniforms and the costs of uniform maintenance, paying out-of-pocket fees that range from $500 to $1,000, as well as for professional development courses that can average several hundred dollars.
The Hill reporter Naomi Jagoda noted that while the bill will likely pass the House, it has little chance in the Republican-controlled U.S. Senate. In October, a Senate vote to overturn regulations related to the cap failed.
“Addressing the cap on the SALT deduction is a big issue for Democrats from high-tax states such as New York, New Jersey and California,” she wrote.
But most Republicans defend the cap, arguing that it helps to prevent the tax code from subsidizing higher state taxes, she added.