A bipartisan bill to fully restore the state and local income tax deduction, which was capped under 2017’s federal tax changes, had the support of all of Long Island’s members of Congress — save one, Lee Zeldin.
Before the Tax Cut and Jobs Act of 2017, taxpayers could write off all of their state and local income and property taxes on their federal tax returns. The tax law capped the deduction, known as SALT, at $10,000 for both single filers and married couples filing jointly.
In states like New York, and especially counties like Suffolk, where property taxes alone can amount to more than $10,000, the loss of the full deduction meant that, for some taxpayers, the Tax Cuts and Jobs Act resulted in a higher tax bill, and the cost of owning a home was higher.
Mr. Zeldin, a Republican from Shirley who voted against the 2017 tax bill put forward by his party, has said in the past that he would like to uncap the SALT deduction, and he has put forth his own bill to do so — but he said last week that this new legislation is not the way to do it.
The bill proposed by U.S. Representative Tom Suozzi, a Glen Cove Democrat whose district includes parts of both Nassau County and Queens, passed in the Democratically controlled House of Representatives on Thursday, December 19, by a vote of 218-206, and now heads to the Republican-controlled Senate — where it may never come to a vote and stands little to no chance of passing if it does.
“Amid all the turmoil in D.C., I am thrilled that the House, with bipartisan support, has passed my legislation to restore tax fairness for my constituents on Long Island,” Mr. Suozzi said in a statement. “The 2017 cap on SALT broke a century-old agreement, a covenant to protect state and local government, and my bill restores that protection, it restores that covenant, and it restores fairness, as well.”
The legislation would double the SALT deduction cap to $20,000 for joint filers for 2019, and fully restore the deduction for 2020 and 2021. It does not alter the cap for 2022 forward.
Mr. Zeldin said he objects to the legislation because it calls for a temporary change to the SALT deduction while permanently raising the top income tax rate from 37 percent to 39.6 percent. It would also lower the entry point to top tax bracket, so some who are currently in the 35 percent tax bracket would be moved to a 39.6 percent bracket, he pointed out.
“North of 90 percent of all U.S. businesses are pass-through businesses, and almost 99 percent of pass-through businesses are under 100 employees,” Mr. Zeldin said. “And the pass-through businesses pay taxes through the individual tax rate, not the corporate tax rate.” The 2017 tax law reduced the corporate tax rate from 35 percent to 21 percent.
“You’re capturing a large bulk of businesses, not just locally but across the country,” he said.
While he did not back this bill, he said there are several other bills to uncap the deduction that he does support and has co-sponsored, and that he has offered to work with Mr. Suozzi on a bill that would garner bipartisan support in both houses of Congress.
Mr. Zeldin said he would prefer to pay for the cost of reinstating the full deduction by closing loopholes in the federal tax law.
“There are several different bills, and there are literally a thousand different ways to solve this issue,” he said. “The problem with this particular bill is that it’s making a temporary change to the SALT deduction in exchange for a permanent increase in the 37 percent tax bracket to 39.6 percent, as well as including many individuals in the 35 percent bracket, increasing their taxes to 39.6 percent.”
One loophole he wants to close is allowing taxpayers to make massive donations to skip out on paying a tax.
Another area he suggested looking at is cutting spending. “If you’re going to be cutting revenue to the federal government, it’s a responsibility of whoever is proposing that decrease in taxes to also suggest ways to — and work with colleagues on both sides of the aisle — on ways to make the government operate more efficiently,” Mr. Zeldin said.
The “doomsday” threats over the 2017 bill, like plummeting real estate values on Long Island, did not come to fruition, he said, and many of his district residents are paying less in taxes, such as those who were already claiming the standard federal deduction rather than itemizing their deductions. The tax bill nearly doubled the standard deduction.
“When I voted ‘no’ on the 2017 tax law, it wasn’t because I was buying into the argument of others that Long Island was going to capsize and tip over into the Atlantic Ocean,” Mr. Zeldin said.
Rather, he said, his issue with the bill is that it raised taxes on too many people.
New York Governor Andrew Cuomo praised the passage of Mr. Suozzi’s bill in the House. In a statement, he said in part: “The Trump administration’s SALT policy was a politically motivated economic assault on New York. As the number one donor state, New Yorkers are sick and tired of being used as ATMs, footing an additional $15 billion each year that will be redistributed to red states and big corporations.”
U.S. Representative Peter King from Seaford was one of the Republicans in the House to vote in favor of the bill.
“We give far more to Washington then we get back,” Mr. King said in a statement. “For every dollar we give, we get 79 cents back. That’s a $48 billion shortfall and hurts our middle-class Long Islanders. This legislation is critical.”
