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Oct 28, 2019

Schumer presses Senate vote on SALT revision, but it fails

WASHINGTON — A legislative maneuver by U.S. Senate Minority Leader Charles E. Schumer to blunt Republican capping of New York’s state and local tax (SALT) deduction met defeat on the Senate floor Wednesday.

In a 52-43 vote that for the most part fell along party lines, the chamber’s Republicans turned down a Schumer measure that would have scuttled an IRS rule banning state “work-arounds” that, in effect, would have permitted taxpayers in New York and other high-tax states to defray the impact of the 2017 Republican tax bill.

“Taking away the SALT deduction was brutally unfair to New York’s hard-working homeowners who bear the brunt of the Trump tax bill,” Schumer said after the vote. “While I am disappointed that this horrible rule will continue to take its toll on working families across the country, I remain committed to eliminating the harmful SALT deduction cap through any means possible.”

The SALT deduction is frequently used by New York taxpayers as a means of offsetting otherwise-burdensome state income and local property taxes. To offset the 2017 tax bill’s lowered rates for corporations and high-income individuals, President Donald J. Trump and congressional Republicans targeted the SALT breaks popular in New York and other high-cost, high-tax states.

Republicans who then controlled by House and Senate proposed eliminating the deductions altogether, but ultimately settled for a $10,000 annual cap.

Gov. Andrew M. Cuomo charged Republicans with perpetrating political payback against blue states like New York, arguing the state has a long history of sending more to Washington in taxes than it gets back in federal spending. Republicans in red states in the south, midwest and west countered that it was their taxpayers who were bearing an unfair tax burden because of blue-state SALT deductions.

Trump and his main economic adviser, Larry Kudlow, argued that the true beneficiaries of the SALT deduction had been wealthy homeowners and taxpayers in the New York City metropolitan area — and not middle-class upstate residents. Schumer and others countered with data showing that upstate taxpayers depend on SALT as well.

Schumer cited data showing that in 2016, 51,000 Albany County residents filed SALT deductions that averaged $15,500.

To soften the blow of the diminished SALT deduction, New York created a work-around in which “charitable” deductions for education, childcare and non-profits serving children, rural hospitals, environmental conservation, and other items would be deductible on federal taxes. But in promulgating final rules this year, the IRS barred the mechanism.

Although Senate Majority Leader Mitch McConnell, R-Ky., normally controls the pace and content of what gets to the Senate floor, Schumer managed to circumvent him by invoking a provision in the Congressional Review Act that permits lawmakers to challenge regulations imposed by administrative agencies such as the IRS.

Schumer cited data showing that in 2016, 51,000 Albany County residents filed SALT deductions that averaged $15,500.

To soften the blow of the diminished SALT deduction, New York created a work-around in which “charitable” deductions for education, childcare and non-profits serving children, rural hospitals, environmental conservation, and other items would be deductible on federal taxes. But in promulgating final rules this year, the IRS barred the mechanism.

Although Senate Majority Leader Mitch McConnell, R-Ky., normally controls the pace and content of what gets to the Senate floor, Schumer managed to circumvent him by invoking a provision in the Congressional Review Act that permits lawmakers to challenge regulations imposed by administrative agencies such as the IRS.

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