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.
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 flashpoints, 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.
New York, Connecticut and New Jersey have adopted proposals to allow taxpayers, to varying degrees, to evade the SALT cap by re-characterizing their state and local tax payments as charitable contributions. Similar proposals are pending in other blue states like California and Illinois.