Repeal of State-Tax Deduction Cap Pitched for Covid-19 Relief Bill

February 22, 2021
JunoConsultants
Lawmakers from New York and New Jersey, looking to capitalize on new Democratic majorities in Congress, are trying to repeal the $10,000 cap on the state and local tax deduction as part of a pandemic-relief bill. But the Biden administration has been noncommittal, and the move looks likely to wait until later this year.
The lawmakers say the cap, created in the 2017 tax law, punishes their constituents unfairly and pushes residents to move to low-tax states such as Florida. They are pitching the break as crucial to their states’ economic recovery.
“Folks have been moving away in droves since our state and local tax deduction was gutted,” Rep. Josh Gottheimer (D., N.J.) said at a news conference outside a U-Haul facility in Paterson, N.J. ”This is key to the health of our economy, key to keeping our state strong.”
The House passed a temporary repeal of the cap in 2019 and did so again last year in a pandemic relief bill, but the Republican-controlled Senate wouldn’t consider the idea, with members saying the top sliver of households would benefit most. Now, with Democrats in charge of Senate- New York’s Chuck Schumer as majority leader-repeal could be nearing its moment.
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