New Tax Law Creating Unexpected Surprise for Local Filers
An Op-Ed by Raja Krishnamoorthi
The key issue facing working families in the aftermath of the Trump tax bill is its imposition of a $10,000 annual limit on the combined amount of state and local (property, sales, and income) taxes that can be deducted from your federal tax bill. Like many others, I warned about the potential impact of capping this so-called SALT deduction when the Trump tax bill was being debated, and now I’m disappointed to see those concerns coming to fruition.
That’s why I have joined in cosponsoring H.R. 257, also known as the SALT Fairness Act. This bipartisan legislation would restore the full SALT deduction and enable millions of families to once again fully deduct their state and local taxes each year.
In this Congress, I have joined in cosponsoring bipartisan legislation that would fully restore the SALT deduction to levels prior to the new tax law, so that millions of taxpayers no longer are penalized.
The impact is especially great on those who live in areas with high property taxes, such as the Chicago area where nearly 128,000 families utilized the SALT deduction on their 2017 tax returns, according to a report produced last fall by the Democratic staff of the House Oversight Committee. The report also projected that 54,000 of those families would no longer be able to deduct their full property taxes in 2018, equal to 40% of all families who rely on the SALT deduction in my community. Overall, the Government Accountability Office expects that four million people will pay more because of the dramatic reduction of their state and local deductions. The SALT Fairness Act would prevent this.
A second major problem is that the vast majority of American employees have not updated their withholding allowance following the rushed implementation of the new tax law. Because the bill was jammed through Congress, it should come as no surprise that in the first year of implementation, many filers have not updated their W-4 form to ensure the appropriate amount is being withheld each paycheck.
Fundamentally, the Trump tax bill was developed without transparency or debate. In fact, there was never a single Congressional hearing, in either the House or the Senate, to inform lawmakers and the public of the many proposed structural changes to the new tax system. That may have helped lead to the bill’s failure to achieve its authors’ most important stated goals.
The tax bill was supposed to help working families, but the tremendous harm caused by the SALT cap shows it didn’t. The bill was supposed to pay for itself, but instead it added more than $1.5 trillion to the deficit. Most of all, it was supposed to spur growth for the benefit of businesses and workers alike, but despite a strong economy, research conducted by the National Association of Business Economics (NABE) has found that the tax law had no major impact on businesses’ hiring or investment plans, creating little to no substantive benefit for American workers.
Moving forward, it is imperative that we find solutions to address the core flaws with both the policy and rushed implementation of the bill. We may not be able to go back in time and draft an inclusive tax bill that strengthens conditions for working families. That ship has sailed along with the Republican majority who steered it. In 2019 and beyond, we can, and must, do everything in our power to promote tax policies that grow the middle class, expand our economy, and help small businesses succeed.