Homeowners Won’t Get Full SALT Deduction
By Dan Murphy
For the first two years of the administration of President Donald Trump, republicans controlled both houses of Congress, from 2016 to 2018. During those two years, the most significant accomplishment from Speaker of the House Paul Ryan and Trump was the Tax Reform Act.
While the new tax plan cut taxes for wealthy Americans, and for everyone paying income taxes, the measure also limited the amount of state income taxes and local property taxes, SALT, that homeowners can deduct on their federal income tax return to $10,000. For Westchester homeowners, who pay among the highest property taxes in the nation, the $10,000 SALT limit resulted in a huge tax increase.
Democrats in New York, and in Westchester, were unanimous in their opposition to the SALT limit, and urged a repeal of the law. Gov. Andrew Cuomo listed a SALT repeal as his number-one priority, calling it “an economic assault on New Yorkers. The state that’s hurt the most by the reduction of deductibility: the State of New York.” Westchester’s three members of Congress – Rep. Nita Lowey, Rep. Eliot Engel and Rep. Sean Patrick Maloney – joined in opposition to the SALT tax deduction cap.
But recently, one New York democratic member of Congress voted to keep the SALT deduction in place: Rep. Alexandra Ocasio-Cortez,, who despite her public persona as being a product of the Bronx, grew up in Westchester and graduated from Yorktown High School.
During her time in Westchester, her parents owned a small home. That same house and its new owners now pay property taxes in excess of $10,000, which is the SALT tax deduction limit passed by republicans in the House led by former Speaker Ryan and U.S. Senate Majority Leader Mitch McConnell.
So last month, when the vote to repeal the SALT tax deduction limit went to the House of Representatives, AOC was one of only 16 democrats to vote “no.” She did not comment went casting her vote on the House floor, but had previously stated that the SALT deduction “disproportionately benefits the wealthy.”
The bill, called the “Restoring Tax Fairness for States and Localities Act,” passed by a narrow 218-206 margin in the House, with only five republicans crossing the aisle to vote “yes,” including Long Island Congressman Peter King, who is retiring and who co-sponsored the bill. King’s bill would have increased the SALT deduction from $10,000 to $20,000 this year and eliminated the cap in 2021.
“Congresswoman Ocasio-Cortez is totally wrong on this,” said King, who blasted AOC for her no vote. “She’s so narrow. The people in my district that are getting screwed by this are not millionaires. They’re cops, firefighters, construction workers. She should open her eyes and look beyond her narrow constituency that she sees. That’s not the whole country. Don’t be penalizing hardworking people.”
AOC backtracked after feeling the heat for her vote, tweeting: “This SALT bill doesn’t bring things back to the pre-GOP norm we’re used to. Due to expansion of the standard deduction, folks who want to claim SALT now need to pay $24K+ in state and local to get it. For those families just over that, the benefit may not be as high.”
She also tweeted: “There are ways to restructure SALT deductions to provide relief to middle-class families – and there are several different SALT repeal bills in the House. McConnell has indicated this bill is going in the Senate graveyard. With another pass, I think we can get this done right.”
AOC is right about one of her thoughts: Any chance for a SALT deduction repeal is dead in the U.S. Senate, where republican Majority Leader McConnell will never allow a vote to happen. Only if the U.S. Senate flips in November 2020 to democratic control – and Trump is defeated in his bid for re-election – will the SALT repeal have a chance of passage.
Here in Westchester, and across the state, New Yorkers were told by their democratic elected officials that the SALT limit would never be allowed to stand. Cuomo and NYS sued to have the law overturned, but failed. Another initiative, from Assemblywoman Amy Paulin, attempted to have New Yorkers pay their property taxes through a charitable contribution to NYS, which was denied by the IRS an the Treasury Department and deemed illegal.
Westchester County Executive George Latimer punched a hole in AOC’s argument against repealing the SALT limit. “I thank the Westchester congressional delegation for co-sponsoring the Restoring Tax Fairness for States and Localities Act and for thinking of the people in Westchester County, sitting at their kitchen tables paying bills – and with them in mind, acting to stop this assault on the middle class,” he said. “I strongly urge the U.S. House of Representatives to vote for this legislation, which would eliminate the $10,000 limit to SALT deductions for 2020 and 2021.
“In Westchester County, more than 47 percent of residents itemize their federal tax deductions, with an average of $34,300 in deductions, well above both the cap and the new standard deduction. This results in double taxation on the same income, and effectively raises taxes on thousands of middle-class and working families in Westchester who depended on the deduction. Many of our federal representatives have championed this issue – I now ask others to join the fight.”
While many economists and realtors predicted the SALT deduction limit would severely hurt the real estate market in Westchester – and other locations where property taxes are way over $10,000 for luxury homes – after three years of SALT, the real estate market in Westchester remains strong and hot.
One Westchester realtor explained that wealthy couples continue to relocate to Westchester from Manhattan, where they were paying $25,000 and greater for private school for their children. “So when they buy a home in Westchester, they have their kids attend our great public schools and use the money they were paying for private school to pay their property taxes.”
Westchester Congressmembers Nita Lowey and Eliot Engel voted “yes” to repealing the SALT deduction last month.
“Simply put, the cap on SALT deductions is an insult to New York’s residents and businesses that send more revenue to the federal government than our state receives back in federal support,” said Lowey. “Specifically, the Tax Cuts and Jobs Act’s cap unfairly burdens Westchester and Rockland taxpayers, who in 2017 ranked numbers one and two for highest average property taxes in the country. Seventeen months after enactment, the TCJA is not paying for itself, as many Republicans promised, and it is not boosting the economy. Outside of these disturbing but not surprising developments, taxpayers in states like New York are struggling to manage serious ramifications from the $10,000 cap on the SALT deduction.”
Engel, who co-sponsored the State and Local Tax Deduction Fairness Act, said: “There’s no other way to say it: New York and other donor states like New Jersey, California, Connecticut and Pennsylvania got screwed by the GOP tax scam. We already pay more in taxes to the federal government than we get back. But now with these new limitations on SALT deductions, the GOP has added insult to injury by creating what amounts to a tax increase for many middle-class families, all to pay for a tax cut for big corporations and the top 1 percent. This injustice cannot stand. My colleagues and I agree that the cap on SALT deductions must be removed immediately and the GOP tax scam must also be repealed.”
The vote by AOC against Westchester County is disturbing for several reasons. First, she continues to ignore and try to hide her past, and admit that she was able to enjoy the benefits of growing up and attending school in Westchester. For those of us who live here and grew up here, we are proud of that fact, and proud of our parents and grandparents who, like AOC’s family, pooled their resources to come up with the down payment to buy a home here. AOC’s story is a story of the American dream that should be shared, not concealed.
AOC’s “no” vote also hurts the same middle class that she pretends to protect, because there are Westchester residents and homeowners who don’t earn more than $125,000 and who also own a home in the county. For those people, they should be entitled to deduct all of their state income taxes and their property taxes.
And the argument given by former Speaker Ryan, and other conservatives, that by limiting the SALT deduction you will force state governments to tighten its belt and cut taxes so that property taxes can be cut, is nonsense.
It sounds good, but it hasn’t happened in the three years since the SALT deduction came into law.
Editor’s note: As part of the Tax Reform Act of 2017, the standard deduction on your federal tax form was increased to $24,000 for joint filers, helping some Westchester residents and families with their federal tax bill.
