New York Gov. Andrew Cuomo, California Gov. Gavin Newsom and five other blue state governors wrote a letter to President Biden this week asking that he undo the $10,000 cap on state and local tax deductions.
The cap, implemented as part of the 2017 Tax Cuts and Jobs Act, has caused taxpayers in New York and California to pay more than $12 billion in additional taxes to the federal government annually, the governors said.
“Like so many of President Trump’s efforts, capping SALT deductions was based on politics, not logic or good government,” the letter stated. “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.”
Several states, including New York and Maryland, filed a lawsuit to repeal the cap, which is still being litigated in the court system.
As previously reported by FOX Business, several lawmakers in the states heavily affected by the cap have also called for its removal.
Rep. Tom Suozzi, D-N.Y., for example, said in a statement this week that he would not support any tax increases unless they are accompanied by plans to restore the full state and local tax deduction.
Suozzi and several other members of Congress signed a letter sent to U.S. Treasury Secretary Janet Yellen this week opening up the channels of communication to work on undoing the cap, stating that they could not vote for a bill that has a meaningful tax impact unless it provides SALT cap relief.
The $10,000 cap was perceived as having a negative effect on residents in blue states – like New York and New Jersey – where income and property taxes are higher.
The average SALT deduction for Westchester and Rockland counties in New York in 2017 was $36,263 and $22,249, respectively, according to the New York lawmakers.
Republicans have characterized the effort to repeal the cap as a tax cut for the wealthy. An analysis conducted by the Tax Foundation estimates its repeal would cost $600 billion in revenue over the course of a decade, with the largest relief aimed at the top 1% of earners.
Biden has not mentioned the provision in his tax proposals.
While the White House is looking for ways to raise money in order to fund legislative initiatives, including a recently detailed $2 trillion effort that involves a nationwide infrastructure revamp, repealing the SALT cap would cost the government revenue.