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By Suzanne Blake
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New York Governor Kathy Hochul has come out in opposition to a tax break rule that she said robs "middle-class families of their hard-earned money."
The state and local tax (SALT) deduction is a federal tax break for filers who itemize to deduct up to $10,000 of some state and local taxes from their taxable income.
However, Hochul is pushing for this deduction to disappear so that middle-class families can benefit, she said in a statement on Thursday.
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Why It Matters
Some taxpayers can get a tax break if they itemize rather than take the standard deduction on their tax forms. The maximum amount the SALT deduction allows for 2024 taxes is $10,000 for those filing jointly. Single filers can only get $5,000.
Critics of the SALT deduction cap say it substantially targets residents in high-tax states like New York and California.
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What To Know
Hochul released a statement Thursday saying New Yorkers deserved a full repeal of the SALT cap.
"The New York Republican delegation owes middle class New Yorkers a full repeal of the SALT cap. This cap has cost New Yorkers as much as $12 billion every year since it took effect in 2018, robbing middle-class families of their hard-earned money," Hochul said in the statement. "Republicans have drained billions directly from the pockets of their own constituents, and now it's time for them to deliver. No excuses. No half measures. It's all or nothing – New Yorkers deserve a full repeal."
Donald Trump originally issued the $10,000 cap when he passed the Tax Cuts and Jobs Act in 2018. Before that time, the SALT deduction was unlimited.
The SALT deduction limit is set to expire at the end of 2025.
While supporters of the cap say it helps increase federal revenue and only targets higher-income taxpayers, critics say it's unfair since it's more harmful in states with higher costs of living and taxes, like New York.
Republicans have been split on the tax deduction cap, with lawmakers who represent higher tax states generally being against it while others suggest it's necessary for the government to enforce.
What People Are Saying
Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek: "The SALT tax cap, which limits state and local tax deductions to $10,000, was implemented as a political maneuver by former—and now newly elected—President Trump, primarily targeting high-tax blue states like New York and California... Removing the cap would significantly benefit residents of states like New York and California, enabling them to deduct a larger portion of the taxes they pay throughout the year."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "The SALT cap has been one of the most contentious debates in taxation law since the $10,000 limit was introduced in 2018. This cap has been especially brutal for states like New York, where the cap triggered less deductions for many when filing taxes. Either increasing the cap or getting rid of it entirely would go a long way in helping with the tax bills for millions of Americans.
"However, it's also important that alterations to the cap be beneficial for taxpayers outside of the top income earners. Whatever decision is made should attempt to ease the tax burden across income brackets for taxpayers with state and local tax deductions."
What Happens Next
Thompson said removing the SALT cap is a "real possibility" especially as Trump campaigned on the idea of reversing the rule.
The Senate would need to remove the cap via a budget reconciliation process, which currently requires 50 votes for approval. Currently, the Republicans have a 53-seat majority.
"The real question is what happens in regard to the TCJA (Tax Cuts and Jobs Act). Will they remove the salt limit and bring back lower standard deductions, or keep it as is and change the salt cap?" Thompson said. "Only time will tell."
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