House Republicans’ proposed tax legislation may include the elimination of state and local tax deductions, but many village officials are stepping up to oppose it.
The state and local tax deduction, or SALT, has been in place since 1913 and allows taxpayers to deduct state and local taxes from their federal tax bill if they itemize deductions.
North Shore villages like Roslyn, East Hills and Great Neck Plaza have passed resolutions formally opposing eliminating the deduction. They said if this tax break were repealed, it could devastate residents.
“Our Congress is looking to take away our taxpayer state and local tax deduction, and millions of families in New York will be hit with a one, two punch: higher taxes and lower home values,” East Hills Mayor Michael Koblenz said.
“Local governments such as us would be hit hard if Washington takes away the deduction,” he added. “We would face the consequences. Reducing local taxes to compensate for a federal tax increase would devastate us.”
Eighty-one percent of tax filers with incomes exceeding $100,000 claimed the deduction in 2014, according to the Tax Policy Center, a nonprofit think tank, while 10 percent of filers with incomes below $50,000 claimed the deduction.
If the deduction remains, the estimated revenue cost to the federal government will be $96 billion in 2017 and $1.3 trillion over a 10-year period from 2017 to 2026, according to the U.S. Department of the Treasury’s Office of Tax Analysis.
The Congressional Budget Office has also reported that capping the deduction could cut deficits by $955 billion over a decade.
Peter Baynes, executive director of the New York Conference of Mayors, said that more than three million New Yorkers take advantage of the deduction.
The cost for the average New Yorker could be hundreds, maybe even thousands, of dollars, Baynes said. But residents in Nassau County could be hit even harder — as could village governments.
“If their taxes have just gone up on the federal side, there’s going to be pressure on the local governments to lower the taxes on the local side to keep the total amount of taxes residents pay at the same level,” Baynes said.
“Local governments are already under tremendous pressure,” he added.
Organizations like the National Governors Association, the United States Conference of Mayors and National Conference of State Legislatures have also opposed eliminating the deduction.
“Eliminating or capping federal deductibility for state and local property, sales and income taxes would represent double taxation, as these taxes are mandatory payments for all taxpayers,” the groups said in a joint statement. “We fundamentally believe that Americans’ income, property and purchases should not be taxed twice.”