SALT cap changes get through the House, but don't count on help for this year's taxes

It didn’t get nearly the attention of a lot of other measures in the US House this week, but members passed a modification to reduce one of the biggest tax hikes that resulted from the GOP Tax Scam – the raising and then removal of the cap on deductions for State and Local Taxes (SALT).

The SALT cap prevented filers from writing off more than $10,000 of those taxes on their return – no matter whether it was a single person or a married couple filing jointly. That flaw meant that a lot of 2-income households hit the SALT cap, and combined with the higher standard deduction (which WAS doubled for married couples vs singles), it made deductions for items such as mortgage interest, property taxes, and charity worthless for those couples to take.

The bill that passed the House would fix the flaw to allow more of those married couples to take those deductions when they file taxes in the coming months. But then it goes a step further, and gets rid of the SALT cap entirely starting next year.

The bill would raise the cap to $20,000 for married couples for 2019, fixing the marriage penalty. It then would largely eliminate the cap for 2020 and 2021. It also would increase the amount of a deduction for educators’ expenses and create a new deduction for first responders’ expenses. As a result of the GOP motion, those educators and first responders would be able to deduct up to $1,000 of expenses, up from $500 in the earlier version of the bill.

To offset the cost of these changes, and to curb the benefits of the bill for high earners, the bill would raise the top individual tax rate from 37 percent to its pre-GOP tax law level of 39.6 percent. That change would take effect for 2020 through 2025, after which time nearly all of the 2017 law’s tax changes for individuals, including the SALT deduction cap, expire.

The entire removal of the cap was a reason why some left-wing organizations opposed the bill to remove the SALT cap. Let me resurrect this chart that was part of a report from the Center on Budget and Policy Priorities.

It’s likely that studies like that one helped to encourage some vulnerable northeastern Republicans to vote for the measure, but it also led some Democrats to vote against it. Including my own Congressman!

Five Republicans voted for the bill — Reps. Brian Fitzpatrick (Pa.), Peter King (N.Y.), John Katko (N.Y.), Tom Reed (N.Y.), and Chris Smith (N.J.). Fitzpatrick, Katko and Reed voted for the GOP tax law.

Sixteen Democrats voted against the bill, including progressives such as Reps. Alexandria Ocasio-Cortez (N.Y.) and Mark Pocan (Wis.), as well as vulnerable freshmen Democrats in Trump districts such as Reps. Kendra Horn (Okla.) and Ben McAdams (Utah).

It’s especially interesting that Dane County’s Pocan chose to vote against SALT cap repeal, because Dane County is a place that would benefit the most from the bill, as shown in the dark blue on this map.

Don’t worry, we still love ya, Mark. But those of us with two incomes and high educations are the ones most likely to be screwed by the Tax Scam under SALT. Might want to keep that in mind down the road as we try to untangle the regressive GOP mess that our tax code is in.

Despite this week’s action, the article from the Hill says it will be unlikely that the SALT cap will be changed on our upcoming tax returns, because Moscow Mitch and the rest of the GOP crew in the Senate plans to bury it in their legislative graveyard. And even if it were to pass the Senate, President Trump has threatened to veto it out of a laughable claim of “tax fairness” (funny, they didn’t care about fairness when they targeted the Tax Scam to the rich and corporate).

So while I can selfishly hope that the SALT cap gets modified to give me and my wife a break on our income taxes, I don’t see it happening this year. And while numerous profitable corporations are paying ZERO taxes and likely will get sizable refunds, us and a lot of others will likely be writing another check to the IRS this April (even after increasing our withholdings in 2019). Mostly thanks to the fiscal genius of Wisconsin’s own Paul Ryan.

Soooo punchable.