No relief for taxpayers denied deductions for state and local taxes

WASHINGTON — President Donald Trump again indicated last week that he might be open to revisiting the new limit on state and local tax deductions that hits many middle-income residents hard in California and other high-tax, Democratic states.

Even so, don’t count on any changes soon to the Republican tax law that went into effect last year.

Legislative and political realities mean the $10,000 cap is unlikely to be scrapped or increased until after the 2020 elections at the earliest.

Although opposition to the cap is widely believed to have helped defeat Republican House members in California, New York and New Jersey last November, a key Senate Republican is adamantly opposed to a change. And increasing or eliminating the cap probably wouldn’t help get those seats back.

New York Gov. Andrew Cuomo, a Democrat and leader of the fight against the cap, this month called the new tax policy “an economic civil war that helps red states at the expense of blue states.”

Cuomo met with Trump at the White House on Tuesday to discuss the matter.

“I told the president myself today: SALT repeal is hurting us. And if you hurt New York, you’re harming the economic engine of the nation,” Cuomo tweeted afterward.

He said Trump indicated he was open to making changes, similar to something the president had said last week during a meeting with newspaper reporters.

Judd Deere, deputy White House press secretary, said Trump listened to Cuomo’s concerns.

“The president reiterated the negative impact that high taxes in states like New York have on hardworking families and job creators,” Deere said.

Trump’s top economic adviser, Larry Kudlow, said Thursday that he would meet with Cuomo and his staff soon to discuss possible solutions.

“They have some ideas to kick around. We might have some ideas to kick around,” Kudlow said. “I want to be deliberately vague, because vague is all we have. We’ll see.”

Lawmakers and officials from states most affected by the cap are pushing to scrap it after arguing strongly during the debate over the Republican tax bill in 2017 that their residents were being unfairly targeted because they tend to vote for Democrats.

Of the top 10 states for deductions for state and local taxes, known as SALT, Trump carried only three in the 2016 election.

“Capping the SALT deduction was a direct hit on my constituents and my state,” Rep. Mike Thompson, D-Calif., a senior member of the taxwriting House Ways and Means Committee, said this week. “We must have relief in this area, whether it’s changing the cap in some way or something else.”

But the path to changes is filled with severe obstacles.

The 2017 tax law cut the corporate tax rate and reduced personal rates across the board.

Republicans argue that the state and local tax deduction is mostly used by the wealthy and is unfair to residents of lower-tax states. Capping the deduction helped simplify the tax code and made it more equitable, they said.

What’s more, the rules adopted by the new House Democratic majority mean they would have to raise hundreds of billions of dollars elsewhere to make up for the tax revenue lost by reinstating the deduction. That would increase Republican opposition.

“Capping the SALT deduction was a direct hit on my constituents and my state,”

– REP. MIKE THOMPSON