Tax Update Blog

Treasury Secretary takes heat in hearing for President’s budget not addressing SALT cap

June 17, 2021 | Blog
By Jay Heflin

Treasury Secretary Janet Yellen on Thursday took heat from Democrats on the tax-writing House Ways and Means Committee for President Joe Biden’s budget request failing to address the $10,000 cap on the State and Local Tax Deduction.

“The Administration’s silence on this makes my constituents worry,” said Rep. Bill Pascrell (D-NJ), a senior member on the Committee who is known for being verbose during hearings.

“It is the oldest deduction on the books. They knew what they were doing in the Civil War to help out the states,” he told Yellen, adding, “we made the case for full repeal of this cap. You noted this cap has a disparate effect on taxpayers – you said it. But when the Administration’s tax proposals came out there’s not a single mention of SALT relief.”

Pascrell said that property taxes average about $24,000 in Bergen County, which is a part of his congressional district. It is also not considered a high-income area for the State as its median income between 2015 and 2019 was roughly $100,000, according to the Census Bureau.

“There are not a lot of billionaires in Bergen County,” Pascrell said to Yellen, adding that “if the threshold is $10,000, you know better than I do that’s far from when we had the total deduction.”

Pascrell did not mention that in some cases the Alternative Minimum Tax used to negatively affect the SALT deduction before the 2017 tax reform law.

Another Committee Democrat to criticize the president’s budget lacking a SALT fix was Rep. Thomas Suozzi (D-NY).

“We need to mitigate the harm caused by the SALT cap,” he said.

Yellen repeatedly told the panel that President Biden does not have a fix for the cap. However, he would be willing to work with Congress on addressing the issue.

“It’s a tremendous concern for a number of states and he wants to work with Congress to see if there is a way to mitigate the harms that it has caused,” Yellen said.

Rep. Kevin Brady (R-Texas), the Committee’s Ranking Member, asked Yellen if Biden would support modifying the cap in the infrastructure package that is currently under discussion on Capitol Hill. The Treasury Secretary did not provide a straight answer, which is common when such questions are asked during congressional hearings.

“I’m not going to negotiate here,” she said.

The 2017 tax reform law capped the SALT deduction at $10,000, and it is currently set to expire at the end of 2025. In other words, barring congressional action to modify the cap, it will end in 2026.  


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