Lawler wants to double SALT deductions for married couples in latest bid for tax help

January 30, 2023

The Journal News

By David McKay Wilson

U.S. Rep. Mike Lawler’s bill to double the deductibility of state and local taxes for married couples is the latest attempt by a New York political leader to either undo or soften the impact of Trump-era tax reforms that have penalized homeowners in high-tax states like New York.

Lawler’s bill to make the state-and-local-tax deduction cap – known as the SALT cap – more palatable comes two years before the $10,000-limit on SALT deductions, and the accompanying tax cuts for individuals and businesses passed in 2017, will expire at the end of 2025.

Lawler, R-Pearl River, said the bill would eliminate what he calls the “marriage penalty” in the current regulations. The regulations allow single filers to deduct $10,000 in SALT payments from their taxable income. But married couples filing jointly have the same limit. If married partners file separately, they can only claim $5,000 each.

Lawler, who says he wants to cut government spending to help rein in the federal deficit, declined to disclose what the measure would cost the federal government in lost tax revenue nor what government spending he would cut to make up for the loss.

He said the cost of his bill was “negligible” when compared to the cost of eliminating the cap, which the Brookings Institute has estimated at $85 billion a year.

“As we move forward in the budget process, and work to reduce wasteful government spending, this change will provide tax relief for hardworking Hudson Valley families, who will see a return of thousands of dollars to their pockets at a time they need it most,” he said.

Lawler in November ousted US Rep. Sean Patrick Maloney, D-Cold Spring, whose home ended up in the 17th Congressional District following redistricting. That district comprised about 75% of the former district of Rep. Mondaire Jones, who decided not to primary Maloney, and moved to Brooklyn in an unsuccessful bid to win a Democratic primary there.

Jones has since moved back to Westchester, and now lives in Sleepy Hollow, which is located in the 17th District.

Jones doubted that House Republicans will rectify the damage done in 2017.

“Republicans were the ones who capped the deduction at $10,000, and here this guy is trying to suggest that Republicans will provide relief to residents in the Hudson Valley,” said Jones, who debuted Wednesday evening at his new gig as an on-air commentator on CNN. “It’s a modest attempt to rectify the great damage done by Republicans in December 2017.”

Whether Lawler can find traction among a bipartisan coalition in Congress remains to be seen. The bill’s co-sponsors include Rep. Anthony Esposito, a Long Island Republican, and Rep. Mikie Sherill, D-NJ.

Lawler said he’s counting on the 14 Republicans from New York and New Jersey and 12 Republicans from California to form a coalition that could help sway the Republican conference.

He believes he can convince the Republican-controlled House to pass it.

“We are a formidable voting bloc that can move or not move legislation,” he said. “For the purposes of getting something done on SALT, that is an avenue we may pursue.”

Democrat attempts

Democrats couldn’t get it done when they controlled both houses of Congress and the presidency. At the time, Westchester County was ground-zero for press conferences by Gov. Andrew Cuomo, Senate Majority Leader Chuck Schumer, and Rep. Tom Suozzi, D-Nassau, who made his SALT deduction campaign a centerpiece of his failed bid for the Democratic nomination for NY governor.

Assemblywoman Amy Paulin, D-Scarsdale, tried as well, leading the effort that convinced the village of Scarsdale to sue the IRS after it announced a regulation that prohibited municipalities from setting up charitable funds that New York Democrats believed could be used to circumvent the SALT cap. That case lingers in US District Court in Manhattan, with no action in the case since the fall of 2021 as the village awaits a ruling from Judge Paul Gardephe.

In 2021, House Democrats upped the cap on SALT deductions to $80,000 in the Build Back Better legislation, an addition to the massive spending bill insisted upon by some New York and New Jersey members of Congress.

But that bill, which passed the House, failed to win Senate approval. A scaled-back bill that passed in 2022 did not include raising the SALT deduction cap.

Frank Clemente, executive director of Americans for Tax Fairness, said the fight over continuation of the Trump tax cuts in 2025 is expected to become a major issue in the 2024 presidential campaign and Congressional elections. The cap on SALT deductions are certain to be part of that debate, he said.

“If Congress does nothing, it will revert to the original deduction, which will be great for the rich in high-tax states like New York,” he said.

Republicans wanted the cap on deductions

 House Republicans were adamant in 2017 that the SALT deductions be capped as a way to pay for the Trump tax cuts.

Now Republicans, including Lawler, are concerned with the rise in the federal deficit, which was fueled in part by the tax cuts.

In 2023, those concerns about the federal deficit have led to warning that they will not approve raising the federal debt limit unless Democrats agree to cuts in federal spending, which could include reductions in Social Security and Medicare.

Lawler in January voted for the House Republican plan to rescind $80 billion to restructure the IRS that was approved by the Democratic majority and signed by President Biden in 2022. That action, which lacks support in the Democrat-controlled Senate, would add an estimated $114 billion to the federal deficit over 10 years, according to a Congressional Budget Office report.

Lawler said he’ll rely on his expertise learned at Manhattan College and running his political consulting firm when he takes aim with the budget knife at the burgeoning federal budget.

“As someone who graduated with an accounting degree from Manhattan College and who also owns a small business, I know the importance of going line-by-line through any budget to save costs and produce a long-term plan that closes the deficit and reduces our debt.”