In one of its last actions before the holiday recess, the U.S. House of Representative passed a measure cosponsored by Rep. Tom Suozzi, a Democrat from Glen Cove, and Seaford Republican Pete King to restore the full deduction for state and local taxes that was capped at $10,000 in President Trump’s 2017 tax reform package.
No matter which side of the political divide residents are on, the $10,000 cap on deducting state and local taxes from federal tax bills — including property taxes — has hit residents hard in areas like Seaford and Wantagh.
“We give far more to Washington than we get back,” King said. According to the congressman, residents in his 2nd District give up 21 cents on every dollar of tax they send to Washington. “That’s a $48 billion shortfall, and hurts our middle-class Long Islanders,” he said.
Senate Majority Leader Mitch McConnell said the bill had little or no chance of passing in the Republican-controlled Senate.
King was the only Republican cosponsor of the bill, H.R. 5377, which had 51 Democratic cosponsors. Sixteen Democrats voted against the measure, which was supported by five Republicans. Six representatives abstained from the vote, which passed the House by a margin of 216-203.
The cap would be raised to $20,000 in 2019 for married couples filing jointly, with full deductibility restored for the 2020 tax year. At the same time, the bill would restore the top income tax rate to 39.6 percent. The 2017 Trump plan cut the top rate to 37 percent for the nation’s wealthiest taxpayers.
According to U.S. Rep. Nita Lowey, a 15-term Yonkers Democrat who has announced her retirement at the end of 2020, 35 percent of New York taxpayers claimed at least $25,000 in exemptions before the cap was enacted. Lowey has been an ally of Suozzi and King in their efforts to restore the SALT deduction.
Median home values in Seaford stand at roughly $450,000, and at $480,000 in Wantagh, on median household incomes of $129,000 and $136,000, respectively. While the effective median property tax in both communities is around $10,000, residents also pay income and sales tax.
New York legislators have been working to find solutions as well, introducing measures at the state level to provide relief to those hardest hit by the cap. One proposal would have established charitable trusts that municipalities could use to pay for local services, while offering tax credits to their residents. Contributions to the trusts would be deductible, constituting a de facto restoration of the SALT deduction.
Those measures have not fared well, however. In June, the Internal Revenue Service ruled that such trusts constitute quid pro quos, and that because contributions to them were not strictly charitable in nature, deductions could not be claimed.
And in September, a federal judge for New York’s Southern District dismissed a lawsuit brought by New York, Connecticut and Maryland challenging the legality of the cap, saying the president and the Congress were within their constitutional authority when they enacted the cap, and that the cap was not “unconstitutionally coercive,” as the suit alleged.
State Sen. John Brooks, a Democrat from Seaford, has repeatedly spoken out against the cap. Since it took effect, New Yorkers have effectively been taxed twice on the difference, he said, increasing the already heavy burden imposed by some of the highest property taxes in the nation.
The Suozzi-King vote has produced some surprising alliances. Bronx Democrat Alexandra Ocasio-Cortez, usually found on the left of most issues, voted against the measure, which she said would fail to benefit most middle and lower income taxpayers. “There are ways to restructure SALT deductions to provide relief to middle class families,” she said after the vote. “McConnell has indicated this bill is going to the Senate graveyard. With another pass, I think we can get this done right.”