Phillips Leads the Push for State and Local Tax Deduction Cap Repeal
WASHINGTON, DC – Late yesterday, the House Ways and Means Committee took action to repeal a 2017 cap on state and local tax (SALT) deductions after hearing from Rep. Dean Phillips about the cap’s harmful impact on Minnesota’s Third Congressional District. The committee passed the Restoring Tax Fairness for States and Localities Act in a bipartisan 24-17 vote. Phillips is an original co-sponsor of the legislation, which eliminates the cap on SALT deductions in 2020 and 2021.
The deficit-exploding 2017 tax bill capped SALT deductions at $10,000, penalizing residents of high-tax states like Minnesota. IRS Statistics on Income figures show that Phillips’s district ranks 35th out of all 435 congressional districts as the most-impacted by the SALT cap and is the second-most harmed district in the Midwest. At 47%, Minnesota’s Third District has the highest percentage of filers claiming the deduction in the state, and the highest average deduction – about $20,000.
Corporations, on the other hand, are allowed to deduct the entirety of their state and local tax payments from their federal taxes under the 2017 law.
“Our tax code should reflect our values,” said Phillips. “The 2017 Tax Cuts and Jobs Act was an irresponsible sugar rush that blew a hole in the deficit and came at a time when Congress should have been encouraging real, fair, and long-lasting prosperity. The average tax filer in my district is being taxed twice on $10,000 of their annual income. That’s outrageous and it’s hurting economy, our schools, and our communities. I’m grateful to my colleagues on both sides of the aisle who listened when I shared Minnesota’s story and came together to propose this common-sense fix.”
After Phillips brought his case to the House Ways and Means Committee in June, the committee fast-tracked the Restoring Tax Fairness for States and Localities Act, which includes:
- An elimination of the SALT deduction cap in 2020 and 2021, creating a bridge for a future administration to permanently reform the tax code
- An elimination of the marriage penalty in 2019, doubling the SALT deduction cap for married filers
- The reinstatement of the top individual income rate (individuals with an income of more than $427,000) to 39.6%
- An increase of the Educator Expense Deduction, doubling the amount educators can deduct annually for classroom purchases to $500
- The creation of a $500 deduction for the expenses of professional first responders
More than 7,670 educators in Minnesota’s Third District take advantage of the Educator Expense Deduction, one of the highest numbers in the state.
The legislation is expected to raise $190 billion and cost $186 billion. Leftover funding will go to deficit reduction. The House is expected to pass the Restoring Tax Fairness for States ad Localities Act next week.
Click here to watch the full video of Rep. Phillips’s June testimony about the harmful impacts of the 2017 SALT deduction cap.
Click here to read the full text of the Restoring Tax Fairness for States and Localities Act.