Posted: Oct 12, 2021 12:01 AM
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Before Congress completes consideration regarding either or both mega-infrastructure bills, it needs to determine how it will offset the reduction in federal tax revenues that will occur resulting from the many states’ legislation passed in 2021 to “work around” the state and local tax (SALT) deduction cap of $10,000.
It matters not whether each or any member of Congress believes the $10,000 SALT cap is justified and/or unjustified or whether the members of Congress believe the “workarounds” are appropriate. The loss to Treasury could be in the hundreds of billions of dollars. The loss of revenues either needs an offsetting tax increase or clarity that it has been considered in the calculation of expected future deficits. Either decision should impact the ultimate size of the mega-infrastructure bills.
The Tax Cuts and Jobs Act of 2017 placed a cap on state and local tax deductions (SALT) of $10,000. Simultaneously, the Act increased the standard deduction from $6,500 to $12,000 for single individuals and $13,000