Politico, Blue States Find Ways to Undercut GOP Tax Law:
Residents of some blue states may get a surprisingly big tax cut thanks to workarounds state lawmakers are crafting to subvert a controversial new cap on deductions for state and local taxes.
In places like New York, taxpayers will not only be able to claim the same break as before Republicans imposed a new $10,000 cap on the deduction, but they will also be able to sidestep longstanding federal rules on exactly when the deduction may be taken.
“They’re actually giving them a bigger tax break than they would have gotten under the previous law,” said Dean Zerbe, a former congressional tax aide and critic of the workarounds.
It’s a little noticed and unexpected dynamic in the partisan battle over the recent tax overhaul. The new SALT cap has been one of the biggest flash points, with Democrats from high-tax states complaining they were targeted by congressional Republicans. Now, months after the law passed, Republicans are having trouble convincing voters that they’re really going to benefit from the cuts the law enacted. Meanwhile, lawmakers in blue states are magnifying the cuts with their workarounds.
States say they are merely restoring what Congress took from them. But some of the states would go beyond that, giving their residents breaks unavailable in other states. What’s more, even as Democrats lambaste the new tax law as a giveaway to the rich, their workarounds would disproportionately benefit the well-to-do because they tend to have the most state and local taxes to deduct. ...
David Kamin, a former Obama administration aide who backs the workarounds, acknowledges they go beyond restoring the old rules. But he points the finger at Congress. “It’s understandable why state leaders would potentially want to essentially give tax cuts to their population that doesn’t cost them revenue,” said Kamin, who now teaches at New York University’s law school. “That’s not to say that it makes sense for Congress to have set up that incentive,” he said, adding lawmakers in Washington need to reconsider the SALT cap.