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Senate tax bill to include partial 'SALT' deduction

UPDATE: The Senate GOP tax bill passed very early Saturday morning in a major victory for Trump, Republicans

WASHINGTON — The tax reform bill heading toward passage in the Senate will allow homeowners to deduct the first $10,000 of state and local property taxes that they pay, matching a provision in the House version of the bill and clearing what could have been a big hurdle to the bill's final approval.

Sen. Susan Collins, a Maine Republican who has been pushing for the partial restoration of the so-called SALT deduction, announced the change in the bill via Twitter Friday afternoon.

"The Senate tax bill will include my SALT amendment to allow taxpayers to deduct up to $10,000 for state and local property taxes," Collins said, adding in a follow-up tweet that she was "delighted" that the final bill will include her proposal.

The change comes a day after Collins told reporters she could not support the Senate tax reform bill so long as it called for totally eliminating the state and local tax deduction.

Collins' announcement is modest good news for New York, one of the highest-taxed states in the nation. Gov. Andrew M. Cuomo has said the state's residents would pay upwards of $18 billion more annually in federal taxes if the SALT deduction were to be repealed in its entirely.

Yet the SALT compromise is still likely to cause significant fiscal problems for New York if the federal tax bill becomes law. That's because the state draws a significant portion of its tax revenues from high-income residents who would be hit the worse by even a partial repeal of the deduction – and who could be tempted to move out of state as a result.

The addition of Collins' amendment to the Senate tax plan also eliminates what could have been a significant point of contention in a House-Senate conference committee that would have to negotiate a compromise between the differing tax bills passed by the two houses of Congress.

Senate GOP tax bill passes in major victory for Trump, Republicans

GOP House members have said that if the final version of the tax bill eliminated the SALT deduction entirely, Republican lawmakers from New York, New Jersey, California and other high-tax states might vote against it, thereby jeopardizing its passage.

Collins' tweet came hours after Sen. John Cornyn of Texas, the Senate's second-ranking Republican, announced that the party had the votes it needs to pass its tax plan.

That appeared in doubt just hours earlier after the Joint Committee on Taxation announced the measure would boost the federal deficit by $1 trillion over a decade.

Senators were still laboring Friday to adjust the tax plan in reaction to that report, and Collins' amendment may force further adjustment.

She said Thursday that her measure would cost $145.8 billion over a decade. Collins also suggested cutting the business tax rate from 35 percent to 21 percent – compared to 20 percent in the original bill – to help pay for the partial SALT deduction. She also suggested keeping the top individual tax rate at 39.6 percent, rather than cutting it to 38.5 percent as the original Senate bill would do.

Speaking at a breakfast sponsored by the Christian Science Monitor on Thursday, Collins cited several reasons why she was pushing for the partial restoration of the SALT deduction.

"I want to help middle-income families," she said. "I want to keep the provision that's been in the tax code since the very beginning – this isn't a special interest provision that's been added lately. And I think it's just a matter, also, of avoiding double taxation."


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