With nod from Trump, Dems push for state tax fix

WASHINGTON — Connecticut Democratic lawmakers on Thursday called on President Donald Trump and congressional leaders to adjust the $10,000 cap on state and local taxes — SALT — after Trump said in an interview that he was “open to talking about” revisions to the 2017 GOP tax law.

"The number one concern I've heard over the past year about the GOP tax bill is the restriction on SALT deductions, which disproportionately affects states like Connecticut, especially in Fairfield County,” said Rep. Jim Himes. “Fixing the SALT issue should absolutely be a priority.”

Connecticut is enmeshed in a lawsuit against the federal government along with three other Northeast states, claiming the limit is in the tax reform act is unconstitutional. The lawsuit says it’s aimed at states like Connecticut and New York with relatively high median incomes, high costs, high taxes — and Democratic governors.

In a White House interview Wednesday with reporters from regional outlets including Hearst Connecticut Media, Trump initially defended the SALT cap as a fair balancing of the tax burdens of low-tax, low-cost (and mostly Republican) states in the South and West, and those of states like Connecticut and New York.

Trump, a New York-based real estate tycoon before becoming president, put a political spin on his comments by saying the SALT cap equalizes the burden of states that “that have been really well run and don’t have debt,” and “states that have been poorly run, like New York and others.”

The SALT cap “makes all states the same,” he said.

But he also acknowledged he had been in touch with unnamed political figures and individuals stressing what they saw as the unfairness of the added tax burden to homeowners and state taxpayers in Connecticut, New York and elsewhere.

“I’d be open to talking about it,” Trump said, adding that the impetus for change would have to come from the Democratic-controlled House.

That gives Democrats an opening to craft a fix. “I will be working with my colleagues to do just that,” said Sen. Chuck Schumer, D-New York, the Senate minority leader.

“The administration’s tax bill was a giveaway to the already-wealthy and corporations at the expense of the middle class and working people,” Schumer said. “Capping the SALT deductions at $10,000 was a gut punch to thousands of middle-class New Yorkers that also lowers home values; it is a punitive and misguided policy that needs to be reversed.”

But even if President Trump ultimately decides to back changes to the cap on SALT, Democrats in Connecticut, New York and elsewhere would face a major hurdle — the Republican-controlled Senate.

Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, said through a spokesman that he would not consider any tweaks to the SALT deduction.

Trump questioned whether the SALT cap has affected middle-class homeowners in Northeast states or just the wealthy, Trump also said “it’s been severe on them.”

Some Connecticut lawmakers tut-tutted Trump for only now realizing the damage that the SALT cap is doing to middle class homeowners and state taxpayers.

“Even President Trump concedes that his riggedfor-the-rich tax law is hurting middle class families and homeowners in Connecticut,” said Rep. Rosa DeLauro. ‘The most recent data shows that 40 percent of the residents in my district were able to make ends meet because of this provision, but the President and Republicans in Congress were not concerned about them when they jammed through the tax bill.”

Sen. Chris Murphy, who like the rest of Connecticut’s congressional delegation bitterly opposed the tax bill when it won Congressional approval late in 2017, called the cap “a partisan trick aimed at hurting states like Connecticut.”

And now, “families are starting to feel it as they file their taxes this season."

Sen. Richard Blumenthal said he was “pretty underwhelmed by President Trump’s vague references to `talking about... changing’ the egregiously harmful tax hit that he pushed through Congress.”

Had Trump “listened to the American people,” Blumenthal said, “he might have understood the devastatingly unfair impact of his cuts in the SALT deduction on middle class families in states like Connecticut.”

The cap now in place limits taxpayers to a combination of $10,000 worth of deductions on either property taxes, state income taxes or state sales taxes.

But a total of 41 percent of the federal tax returns filed in Connecticut in the past claimed an average SALT deduction of $19,665, nearly double the $10,000 limit, according to a Connecticut Office of Legislative Research report. Connecticut ranked second among states in the percentage of filers claiming the deduction.

Trump and Republicans had argued in 2017 that capping the SALT deduction would impact the very rich — with high incomes and large high-cost homes — than the middle class. Indeed, in the interview Wednesday, Trump told a reporter that he thought the cap “affects wealthy people.”

The General Assembly’s Office of Legislative Research shows that in previous tax years, the percentage of filers taking a SALT deduction rose alongside their income brackets.

Virtually every taxpayer with a household income above $200,000 took advantage of the SALT deduction. But, the study showed, so did 88 percent of those with incomes between $100,000 and $200,000, and 67 percent between $75,000 and $100,000.

“I really hope President Trump is serious about taking a look at eliminating the cap on the SALT deduction, but he knew the disaster he was creating when he pushed this bill relentlessly last term,” Murphy said. “The Republicans’ tax bill has been an all-around failure for working- and middle-class Americans and has exploded our deficit.”