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Appeal to Trump on SALT Cap Appears to Get Cool Reception

New York Gov. Andrew Cuomo on Monday talks about his upcoming meeting with President Donald Trump.

New York Gov. Andrew Cuomo on Monday talks about his upcoming meeting with President Donald Trump. AP Photo

 

Connecting state and local government leaders

New York Gov. Andrew Cuomo says "there is no more vital long-term issue" for his state's finances than a limit on the state and local tax costs taxpayers can write off on their federal returns.

New York Gov. Andrew Cuomo in a meeting with President Trump on Tuesday pressed his concerns that a cap imposed on the federal deduction individual taxpayers can claim for certain state and local taxes they pay is hurting his state's finances.

But the White House offered little indication that Trump, a New Yorker himself, was open to coming out in support of relaxing the cap.

Lawmakers and others from higher-tax states, including New York, New Jersey and California, have chafed over the $10,000 limit on the so-called "SALT" deduction that was put in place under the sweeping 2017 federal tax overhaul.

White House deputy press secretary Judd Deere said in a statement about the meeting that Trump "talked about the positive impacts of the Tax Cuts and Jobs Act on the American economy, and the President listened to the Governor’s concerns regarding SALT."

And that Trump "reiterated the negative impact that high taxes in states like New York have on hardworking families and job creators."

Cuomo, a Democrat, discussed the meeting afterwards during a radio interview with WCBS 880. "We can't be stuck with it. It will change the economic trajectory of the state," he said of the SALT deduction cap. 

"For the first time ever, you pay your state taxes and local taxes and then the federal government is going to tax you on what you paid," he added. "It has to be turned around."

Cuomo said Larry Kudlow, a top economic adviser to Trump, was in the meeting and agreed to "follow-up conversations."

"The President understands it. The President previously said that he was open to a change. He suggested he was open to a change here also," Cuomo said. "He understands, you hurt New York, you hurt California, you're hurting the economic engines of the nation."

Trump had told reporters last week that he was "open to talking about” revising the limit on the deduction. 

“There are some people from New York who have been speaking to me about doing something about that, about changing things,” Trump said, Hearst Newspapers reported. “It’s been severe on them.”

Experts with the Urban-Brookings Tax Policy Center have noted that 96 percent of the additional tax from the limitation of the SALT deduction in 2018 was expected to fall on the top 20 percent of taxpayers and 57 percent on the top one percent.

Cuomo, who requested Tuesday's meeting, said earlier this week that "there is no more vital long-term issue for the state, from a financial point of view than SALT" and that the cap had created "two different tax structures," which favored Republican states.

"This is literally taking from the richer states transferring to the states with less income," he added. "New York already sends the most money to Washington D.C. of any other state."

recent analysis by Albany-based Rockefeller Institute of Government found that the money funneled to the federal government from New York, mostly from income and payroll taxes, was $35.6 billion greater in the 2017 federal fiscal year than federal spending in the state.

The governor has suggested that the SALT deduction cap encourages high-income New Yorkers to move to other states and that even if a small number of them leave, it would harm state revenues.

New York saw a decline of $2.3 billion in estimated payments of personal income tax receipts in December and January, which Cuomo has attributed to the curtailment of the full SALT deduction.

Several Democrats and at least one GOP lawmaker in Congress have introduced bills that would repeal the cap on the deduction.

But Rep. Kevin Brady, of Texas, who is the top Republican on the tax-writing Ways and Means Committee, and who was one of the architects of the 2017 tax law when his party still held a majority in the House, dismissed the idea that the cap would be rolled back.

"Congress, in my view, is not going to raise this," he told FOX Business. "Raising the SALT deduction is a $10 a year tax cut for the middle class; a $140,000 a year tax cut for the wealthy. That just isn’t what Congress is going to focus on.”

The cap also promises to raise around $650 billion for the federal government over 10 years, providing a key offset to other revenue-reducing policy changes the tax law ushered in, including the corporate and individual rate cuts that were central to it.

"Their problem is they use the money that they took from New York to finance their tax cut," Cuomo said during the radio interview on Tuesday. "Now they'd have to find additional funding to restore the money that they basically stole from New York, in my opinion."

Bill Lucia is a Senior Reporter with Route Fifty.

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