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Cuomo, 7 governors call for repeal of cap on SALT deductions

The governors are seeking to scrap the limit or persuade the IRS to allow their attempts at workarounds.

Gov. Andrew M. Cuomo is seen on Feb.

Gov. Andrew M. Cuomo is seen on Feb. 11, 2019 in Albany. Photo Credit: AP/Hans Pennink

WASHINGTON — Gov. Andrew M. Cuomo on Friday said he has joined with seven other governors of high-tax states to pressure the White House and Congress to scrap the new federal tax law’s cap on state and local tax deductions that he said is draining their state revenues.

Cuomo, who blames a $2.3 billion revenue shortfall and an out-migration of New Yorkers on President Donald Trump’s signature tax act, said he and other governors have formed a coalition to get the IRS to approve their states’ attempts to work around the deduction cap and to lobby for repeal of it. (The New York State Office of the Budget puts the total shortfall at $2.8 billion, because it had previously underestimated revenues by $500 million.)

But Cuomo and the other governors acknowledged they face a wall in the Republican-controlled Senate, where Sen. Charles Grassley (R-Iowa), the powerful Finance Committee chairman, already has said he opposes any change to the cap.

“We’re here to talk about basic tax fairness,” Cuomo said at a news conference held at the National Governors Association meeting in Washington, where Democratic governors from Connecticut, New Jersey, Illinois and Oregon also spoke.

Cuomo complained that the tax cap of $10,000 for deductions on state and local taxes, often called SALT, in the Republicans’ federal tax act was “politically motivated” as part of Trump’s “economic civil war” between Democratic and Republican states.

“It puts the states with state and local taxes at a significant disadvantage from other states …,” he said. “Now, coincidentally, the states that have state and local taxes tend to be Democratic states.”

Cuomo said he would urge House Speaker Nancy Pelosi (D-Calif.) to put the repeal of the SALT cap at the top of the agenda. New Jersey Gov. Phil Murphy said a bill has been filed by Sen. Robert Menendez (D-N.J.)  and Rep. Bill Pascrell (D-N.J.)  to scrap the cap.

Cuomo said the decline in tax revenues, a 55 percent drop, might force program cuts if attempts to work around the tax caps don’t win approval from the IRS, which he called “problematic,” or if the SALT cap isn’t repealed.

Cuomo announced the coalition a week-and-a-half after he met at the White House with Trump, who gave a lukewarm reception to the idea of tweaking his signature federal tax cut law but, according to Cuomo, didn’t close the door on the idea.

Cuomo repeated Friday that Trump appeared to be “open to a change” on SALT and that White House economic adviser Larry Kudlow would work on a tax cap package.

“I believe President Trump is now open to discussing it because he now has a Democratic Congress with Speaker Pelosi,” Cuomo said about the House leader.    

A White House statement on Cuomo’s meeting with the president, however, had said Trump talked to Cuomo about the “positive aspects” of the tax law and blamed New York and other states for “high taxes” on “families and job creators.”

And Grassley’s office said in a statement said he would not revisit the SALT cap because it’s “federal subsidy for states to raise taxes on their residents without political consequences.”

The coalition includes the governors, all of them Democrats, from New York, Connecticut, Hawaii, Illinois, New Jersey, Oregon, Rhode Island and Washington, according to a Cuomo news release.

Missing at the announcement of the coalition was California, a key state also hit hard by the SALT deduction, and home to both Pelosi, the House speaker, and Rep. Kevin McCarthy (R-Calif.), the House minority leader.

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