Two freshmen Democratic lawmakers from Illinois on Thursday offered legislation that would ease the GOP tax law’s cap on the state and local tax (SALT) deduction, though not completely repeal it.
While other legislation has been introduced by blue-state lawmakers to fully repeal the SALT deduction, Reps. Lauren Underwood and Sean Casten said they took a more targeted approach with their bill in order to boost its odds of passage and focus tax relief toward middle-class households in their districts rather than the wealthy.
“Our goal and our objective is to help middle-class families,” Underwood said.
The 2017 GOP tax law imposes a $10,000 cap on the SALT deduction for both individual filers and married couples filing jointly. The cap, along with the other tax cuts for individuals in the law, expires after 2025.
The SALT deduction cap is one of the most controversial portions of the tax law, because politicians from high-tax, Democratic-leaning states have argued that it disproportionately hurts their residents. But many Republicans have defended the cap, arguing that repealing it would largely benefit high-income taxpayers. Independent analysts have also estimated that repeal of the cap would primarily benefit high earners.
The bill from Underwood and Casten would increase the SALT deduction cap to $15,000 for individual filers and $30,000 for married couples filing jointly. The bill also would index the limits on the SALT deduction to inflation, so that the value of the deduction doesn’t decline over the years.
The changes to the SALT deduction cap in the bill, like the cap itself, would expire after 2025, meaning that the full deduction would be in place after that.
The bill comes several months after Casten and Underwood entered office, defeating GOP incumbents in the 2018 midterm elections in part by talking about the SALT deduction cap. Casten defeated former Rep. Peter Roskam (R-Ill.), who was a key author of the GOP tax law, while Underwood defeated Rep. Randy Hultgren.
“This was a top of mind issue in the campaign,” Casten said.
While the bill might be able to pass in the Democratic-controlled House, it faces an uphill battle to being enacted this year, as it would need to also pass the Republican-controlled Senate.
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said he’s not planning to revisit the SALT deduction cap.
The bill comes during the first filing season under the GOP tax law, and some taxpayers have been complaining about the SALT deduction cap as they have filed their taxes.
Some taxpayers are expected to see a tax increase due to the SALT deduction cap, though most people in high-tax states are getting a tax cut for 2018.
Many taxpayers in high-tax states had their SALT deduction disallowed prior to the GOP tax law because they were subject to the alternative minimum tax (AMT). They are now getting a bigger SALT deduction because the tax law reduced the number of people subject to the AMT.