Ending Your Deduction For State, Local Taxes: Hudson Valley Delegation Weighs In

To move President Donald Trump's tax reform plan along, Republican lawmakers met Tuesday for a working lunch with the president. The plan calls for eliminating the federal deduction for state and local taxes — which would increase the federal tax burden for most Hudson Valley residents, specially homeowners. Members of the New York congressional delegation from the Hudson Valley are giving the plan a thumbs-down because it cuts the SALT.

Under the current federal tax system, taxpayers who itemize deductions on their federal income tax returns can deduct state and local real estate and personal property taxes (known as SALT) as well as either income taxes or general sales taxes.

Ending the deduction is key to the proposal to give tax breaks to corporations, wealthy business owners, and the richest Americans (it would end the tax on estates of more than $5.5 million and couples’ estates of more than $11 million).

“This plan is bad for nearly everyone in the Hudson Valley, but it’s a nightmare for middle class families in Westchester," said Rep. Sean Patrick Maloney (D-17). "I’m all for simplifying the tax code and cutting taxes for middle class New Yorkers, but the plan they’ve come up with is the wrong answer to the right question – they would actually raise taxes for a lot of middle class people in the Hudson Valley. Eliminating local and state deductions is a non-starter – simple as that.”

Westchester is one of the top 10 counties in the country for SALT deductions, according to the Tax Foundation, averaging a SALT deduction of $14,784 in 2014. The other nine counties are in California, Connecticut, New York and New Jersey.

Westchester's not alone. People across the country would be affected, most of them the not-rich. According to the Government Finance Officers Association, more than half of the total amount of the SALT deduction in 2015 went to taxpayers with adjusted gross incomes under $200,000. The GFOA said if SALT were repealed, one in three taxpayers, including people in every state and in all income brackets, would lose.

The elimination of the SALT could raise taxes on almost 600,000 taxpayers in the Hudson Valley by an average of $5,597 per taxpayer, per year, according to the New York State Department of Taxation and Finance.

In Rockland and Westchester counties, the average state and local tax deduction was $26,243 in 2015.

Reaction to the proposal from lawmakers sent to Washington by Hudson Valley voters has been negative.

“The elimination of the state and local tax deduction means that President Trump and the Republicans in Congress would give a tax break to the wealthiest Americans while taking one away from middle-income taxpayers," said U.S. Senator Kirsten Gillibrand. "I voted against the elimination of the SALT deduction because it would hurt New Yorkers. This tax plan helps the wrong people, and I will continue fighting against it.”

Rep. John Faso (R-19) said tax reform was important to grow the economy.

But, he said, "I remain opposed to eliminating the deductions for state and local taxes, as this would represent, in effect, double taxation on New York families."

Yesterday, Gov.Andrew Cuomo and U.S. Senate Minority Leader Charles Schumer launched a statewide push across congressional districts, urging all of New York's delegation to "stand up for this state's middle class and oppose the repeal or reduction of state and local tax deductions."

"Whether the savings from these deductions becomes money for home repairs, groceries, school supplies or even the yearly vacation, it belongs in the pockets of New Yorkers, period," Schumer said in the announcement. "These deductions should not be eliminated so people making millions of dollars a year can catch a tax break of their own."

Cuomo released an analysis of the impact of the proposed elimination of state and local tax deductibility last month.

“I support efforts to make the tax code fairer and to put more money in the pockets of hardworking Americans living in the Lower Hudson Valley,” said Congresswoman Nita Lowey (D-17). “But unfortunately, the so-called Republican plan does not put middle class and working Americans first and would likely increase the deficit. With this outline of a plan, Republican leaders have put a target on the backs of hardworking New Yorkers. We are already a high-taxed donor state that sends much more revenue to the federal government than we get back. Middle class and working families in New York cannot afford another tax increase, but that’s exactly what they will get if the state and local tax deduction is eliminated. I will do everything I can in Congress to defend the SALT deduction and protect New York families from a large tax increase.”

The tax reform plan led to another round of twitterfights Tuesday between the president and Tennessee Republican Sen. Bob Corker, once one of his key Capitol Hill allies. Appearing on ABC's "Good Morning America," Corker — who announced earlier this month that he won't run for a third term in 2018 — said he would like the president to leave the restructuring of the tax code "to the professionals for a little while."

Angered, the president took to his favorite social media platform with a five-tweet rebuke stretching over two hours. He blamed Corker for his role in the Iran nuclear arms deal, referred to Corker as a "lightweight," "incompetent" and "liddle'" [sic], the latter an apparent reference to Corker's height of 5-feet-7-inches, an insult the president used previously when he claimed that Corker was duped by the New York Times during an interview in which the senator said the president was leading the country to another world war.

Corker's one-tweet riposte to the president also echoed an earlier tweet. "Same untruths from an utterly untruthful president. #AlertTheDaycareStaff," Corker tweeted.

J.R. Lind (Patch Staff) contributed to this report.