NJ Leads The Charge To Eliminate SALT Cap On Tax Deductions

NEW JERSEY – Governor Phil Murphy led a coalition of Governors representing states targeted by the Trump Administration’s cap on State and Local Tax deduction, in sending a letter to President Biden calling for the elimination of the cap.

“The SALT cap imposed on blue states by the previous administration was not based on policy, but rather revenge politics,” said Governor Murphy. “Before this cap, New Jersey already paid far more to the federal government in taxes than it received. Now the disparity is even greater as middle-class families in New Jersey face a larger tax burden as they subsidize federal payments to other states. The Biden Administration must support Congressional efforts to eliminate this cap and bring fairness back to our tax system.”

New York Governor Andrew Cuomo, Connecticut Governor Ned Lamont, Illinois Governor J.B. Pritzker, California Governor Gavin Newsom, Oregon Governor Kate Brown, and Hawaii Governor David Ige signed onto the letter calling on the Biden Administration to remove the cap and its associated burden and negative impacts on middle-class families in their states.

The effort was not limited to the letter sent to Biden. U.S. Representative Mikie Sherrill of district 11 led Representatives Tom Malinowski, Josh Gottheimer, Thomas Suozzi, Frank Pallone, Bill Pascrell, Albio Sires, and Dean Phillips in a letter addressed to Treasury Secretary Janet Yellen to highlight the importance of lifting the 2017 State and Local Tax deduction cap and encourage the inclusion of a provision to address the cap in the recently announced infrastructure package.

“For our constituents and millions of taxpayers throughout the country, the SALT deduction cap has imposed a harmful double tax and has created one of the largest marriage penalties in the federal tax code. We could not vote for a bill that has a meaningful tax impact on our constituents unless it restores SALT deduction relief to our middle-class families,” the lawmakers wrote. “As our economy recovers from this public health and economic crisis, it is critical that we provide our constituents and state and local governments with the relief that they desperately need. We believe that the upcoming tax and infrastructure package would be an ideal piece of legislation from which to deliver meaningful SALT reform to our communities.”

In the letter, the lawmakers push back on common criticisms of who the SALT deduction cap impacts by pointing to the outsized effect it has on middle class families in high cost of living areas. These communities are essentially punished for making the key investments in progressive priorities like well-funded public education, adequate pay and benefits for public servants such as teachers and first-responders, climate resilient infrastructure for the next generation, and key environmental protections, among others.

The letter also praises Secretary Yellen’s commitment to working with Congress to ease the SALT deduction cap last week and reiterates the lawmakers eagerness to find common ground to address this issue.

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