Lamont, five other Democratic govs call for end to SALT cap

Gov. Ned Lamont and leaders of five other states — all Democrats — are calling for President Joe Biden to undo a cap on state and local tax deductions enacted by the previous administration, citing the economic burden of the pandemic.

In a letter Friday, the six governors urged the president to eliminate the cap, calling it “simply untenable given the dire economic conditions caused by the pandemic.”

The cap applies to payments on state and local taxes, or SALT, which residents could previously deduct from their federal taxes. That changed in 2017 with the passage of the Tax Cuts and Jobs Act, President Donald Trump’s tax law and signature legislative achievement while in office, which capped deductions at $10,000

The Democratic governors argued, as they have in the past, that that change unfairly targets blue states where residents pay more in taxes to state and local governments.

“Like so many of President Trump’s efforts, capping SALT deductions was based on politics, not logic or good government,” the letter reads. “This assault disproportionately targeted Democratic-run states, increasing taxes on hardworking families.”

The letter was signed by Lamont along with Gov. Phil Murphy, of New Jersey; Gov. Gavin Newsom, of California; Gov. David Ige, of Hawaii; Gov. J.B. Pritzker, of Illinois; Gov. Andrew Cuomo, of New York, and Gov. Kate Brown, of Oregon.

“In Connecticut, which pays more to the federal government and receives back less per capita than any other state in the nation, taxpayers paid $1.3 billion more in additional federal income taxes because of the SALT cap,” the letter reads.

Meanwhile, the law allows corporations “to fully deduct SALT as business expenses,” the letter notes.

Friday’s letter is not the first effort by Democrats to do away with the cap, but it does stand out for Democrats’ attempt to leverage the coronavirus pandemic to achieve it. It comes after financial industry and business leaders in New York have been pushing Biden and Senate Majority Leader Chuck Schumer to undo the cap, CNBC reported.

Previous fizzled attempts to repeal it have been pushed through Congress and the courts.

In late 2019, the Democratically-controlled U.S. House of Representatives narrowly passed a bill that would have undone the cap with support from three Republican members of

Congress. But that effort was doomed to failure in the Republican-controlled Senate and with Trump waiting to veto it.

Democrat-led states have pursued a repeal of the cap through the courts — the letter notes some of those efforts are still pending. In 2019, a lawsuit filed by Connecticut and several other states was dismissed by a federal judge.

But Democratic leaders in recent days have signaled a repeal of the cap could make it in to Biden’s infrastructure plan. House Speaker Nancy Pelosi offered support for including the measure in the plan during her Thursday news conference, Bloomberg reported, and Treasury Secretary Janet Yellen has said she will work with Congress on easing the cap, the outlet reported.

The governors’ letter called Yellen’s commitment “heartening.”