Seven Governors Urge Biden to Abolish SALT Cap

April 2, 2021

The Honorable Joseph R. Biden
President
The White House
1600 Pennsylvania Avenue, N.W.
Washington, D.C. 20500

Dear President Biden:

Thank you for your leadership during these unprecedented times. As more vaccines become available to Americans, there is a clear light at the end of the tunnel, and we look forward to a renewed sense of normalcy and optimism in our country.

Your administration has already taken incredible steps to ease the burden of more than a year of uncertainty caused by a global pandemic, and for that we are grateful. The American Rescue Plan will help more than 160 million Americans with direct payments and provide our states with the resources to keep teachers and first responders on our payrolls. Rental assistance funds will help keep roofs over the heads of our most vulnerable and the funding for schools will help keep our students safe in their classrooms.

We applaud those efforts to help our citizens. But we must go further and undo the cap placed on State and Local Tax (SALT) deductions by the Trump Administration through the Tax Cuts and Jobs Act in 2017. For the first time since Abraham Lincoln created the federal income tax, the cap on SALT deductions established a system of double taxation, where 11 million Americans were forced to pay taxes on the amount they paid in State, local, and property taxes, to the tune of $670 billion over a decade.

Like so many of President Trump's efforts, capping SALT deductions was based on politics, not logic or good government. This assault disproportionately targeted Democratic-run states, increasing taxes on hardworking families. This was unacceptable then, and is simply untenable given the dire economic conditions caused by the pandemic.

In 2019, Governors came together to form a coalition of States to fight for tax fairness to overturn the artificial cap on SALT deductions. In New York and California, taxpayers are each being forced to pay more than $12 billion in additional taxes to the federal government annually. In New Jersey, taxpayers are forced to pay the federal government approximately $3 billion a year in additional taxes. In Hawaii, taxpayers are forced to pay an extra $370 million in additional taxes. In Connecticut, which pays more to the federal government and receives back less per capita than any other state in the nation, taxpayers paid $1.3 billion more in additional federal income taxes because of the SALT cap. Several states commenced litigation against the constitutionality of the law. The cases are still pending.

In short, middle-class Americans are struggling under this federal tax burden, while corporations — which are still able to fully deduct SALT as business expenses — are profiting because of the same law. The negative impacts of the SALT cap on middle class families are particularly egregious when you consider that in the states most affected by this cap, the federal government already takes more in federal taxes than the states receive in federal support, effectively subsidizing federal payments to other states.

It was heartening to hear Treasury Secretary Yellen agree to work with Congress to ease the $10,000 cap on SALT recently. On behalf of our residents, we urge your administration and Congress to continue these efforts to relieve this immense financial burden on our residents and eliminate the SALT cap entirely.

Sincerely,

Governor Phil Murphy
State of New Jersey

Governor Gavin Newsom
State of California

Governor Ned Lamont
State of Connecticut

Governor David Ige
State of Hawaii

Governor J.B. Pritzker
State of Illinois

Governor Andrew Cuomo
State of New York

Governor Kate Brown
State of Oregon