US Secretary of the Treasury Janet Yellen pledged to work with Congress to ease the $ 10,000 cap on state and local tax deductions that has been a key area of focus for New York and New Jersey lawmakers. in recent years.
Yellen indicated that limiting state and local tax cancellations, or SALTs, in President Donald Trump’s 2017 tax law caused “unequal treatment” among taxpayers. Representatives from high-tax states have said that restrictions on the tax exemption have caused their constituents to pay more taxes.
“Many options have been presented, and I would work with you to try to ensure that the inequities this caused are remedied in a fair and responsible manner,” Yellen said in response to a question from Rep. Josh Gottheimer, a new Jersey Democrat, during a hearing of the House Financial Services Committee on Tuesday.
Yellen did not commit to any particular plan. He said there are bipartisan proposals to completely repeal the $ 10,000 limit on the tax exemption, making the deduction unlimited. Another option is to increase the limit, he said. President Joe Biden’s proposal to limit itemized deductions for high-income taxpayers to 28% of their adjusted gross income is another way to expand the SALT deduction.
“We need to study what impact you have had and I look forward to working with you to find a fair way to address it,” Yellen said.
Addressing the SALT boundary is a controversial issue among some factions within the Democratic Party. Representatives from high-tax areas say that middle-income residents in their districts are paying much higher bills to the IRS since the change took effect in 2018.
However, repealing the cap would also provide a large tax break for high-income households. Suspending the cap for one year would cost the government about $ 88.7 billion, with more than half of the benefits flowing to those who earn more than $ 1 million a year, according to the nonpartisan Joint Tax Committee.
House Democrats have repeatedly tried to repeal the SALT cap, but efforts from previous years failed to gain ground in a GOP-led Senate.
The measure was not included in the $ 1.9 trillion bailout bill enacted earlier this month, but lawmakers are looking for ways to pass SALT legislation later this year. Senate Majority Leader Chuck Schumer, D-New York, also supports the effort. He introduced legislation to repeal the SALT limit earlier this year.