New Jersey lawmakers introduce bipartisan bill to lift SALT cap

A pair of New Jersey lawmakers have introduced a bipartisan House bill to lift the cap on state and local tax deductions.

HR 680, introduced Jan. 31 by Democratic Rep. Mikie Sherrill and Republican Rep. Mike Lawler, would lift the $10,000 cap to $100,000 for individuals and $200,00 for married taxpayers, significantly lifting the current cap and eliminating the so-called "marriage penalty." The bill has been referred to the House Ways and Means Committee.

The SALT deduction cap, passed in 2017 as part of the Tax Cuts and Jobs Act, is set to sunset at the end of 2025.

"Since day one, my constituents have asked Congress to right the wrongs of the 2017 GOP tax bill, which punished residents in states like New Jersey with double taxation," said Sherrill in a statement, adding that the bill would eliminate the cap for 99% of taxpayers in her district.

Bloomberg News

Del. Eleanor Holmes Norton, D-D.C., and Rep. Mike Levin, D-Calif., are co-sponsors.

The SALT cap is a closely-watched issue in the municipal bond market, where its biggest impact is on high-tax state issuers like New Jersey, New York and California, which argue that the cap cramps their own taxing flexibility. Investors that hold or trade bonds from those states say the cap affects demand for paper from those states.

Rep. Mike Garcia, R-Calif., introduced similar legislation, the SALT Fairness Act of 2023, in early January. The bill has been referred to the House Ways and Means Committee.

Republicans, who hold a narrow majority in the House, are generally opposed to lifting the cap, and last year introduced a bill that would extend the cap for another three years. Republicans from high-tax states are unlikely to support an extension of the cap. Newly elected Rep. Andrew Garbarino from New York, for example, is co-chair of the bipartisan SALT Caucus as is California Republican Young Kim. Sherrill is a vice chair on the caucus.  

"There's a reason New York leads the nation in out-migration and it has nothing to do with the weather," said Lawler in a statement. "The cost-of-living is crushing families of all backgrounds and the SALT cap is a big reason why. The Tax Relief for Middle Class Families Act will lift the cap on the SALT contribution by tenfold, giving real relief to families across our country."

Similar legislation introduced every year since 2018 has failed to advance.