Tax Update Blog

Witnesses at Tax Committee hearing slam effort to repeal SALT cap

April 20, 2021 | Blog
By Jay Heflin

The effort by Congressional Democrats to repeal the $10,000 cap on the State and Local Tax deduction failed to get a ringing endorsement from witnesses who appeared Tuesday before the Senate Finance Committee.

“I believe all itemized deductions should go, including State and Local Tax,” said Dorothy Brown, an Asa Griggs Candler Professor of Law at Emory University in Atlanta, Ga.

“I don’t want any taxpayer to be allowed to itemized deductions,” she added.

Shay Hawkins, President and CEO of Opportunity Funds Association in Washington, D.C., also testified before the committee and said that repealing the cap would only benefit wealthier taxpayers.

“That [cap] is objectively oriented toward the absolute 1% and should absolutely not be repealed,” he said.

Over 90% of the top 1% of taxpayers would benefit from the repealing the cap, according to the Center on Budget and Policy Priorities, a left-leaning thinktank in Washington, D.C.

The witnesses’ testimonies came as congressional Democrats have made repeated efforts to repeal the SALT cap.  One of their latest attempts was a letter to President Joe Biden asking him to undo the cap. White House Press Secretary Jen Psaki has said that Democrats must find a way to pay for the repeal for it to occur.

A handful of congressional Democrats on Monday responded to Psaki, saying that reducing the tax gap, which is the difference between the taxes that are owed and the amount that is collected on time, would provide the needed revenue.

IRS Commissioner Charles Rettig last week estimated that the tax gap amounts to roughly $1 trillion each year.  Returning to a full SALT deduction would require $88.7 billion in revenue for the current year, according to the Joint Committee on Taxation.

The main thrust of the Finance Committee's hearing today was not about the SALT deduction, but on racial, ethnic, and gender disparities in the tax code.

Senate Finance Chairman Ron Wyden (D-Ore.) noted during the hearing that tax incentives for homeownership, education and retirement savings generally go to White taxpayers more than other groups.

Hawkins stressed that the pass-thru deduction created in the 2017 tax reform law should not expire in 2026 or be capped.

Minority-owned businesses “would be harmed if it was rolled back,” he said.


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