Trump Offers No Assurances After Cuomo Meeting on SALT Deduction

(Bloomberg) -- President Donald Trump offered no assurances that he’d address complaints about a new limit on federal deductions for state and local tax payments after meeting Tuesday with New York Governor Andrew Cuomo, a fierce critic of the cap.

The president “listened to the governor’s concerns,” Trump spokesman Judd Deere said in a statement following the White House meeting. He added that the session “demonstrates the president’s willingness to meet regularly with our nation’s governors.” The statement didn’t promise any action.

Trump Offers No Assurances After Cuomo Meeting on SALT Deduction

Cuomo, a Democrat, said in an interview afterward with WCBS Radio that Trump told him “he was open to discussing” the deduction cap. Trump, Cuomo added, said “he would like to see if he could put a package of reforms together because even they recognize that original tax bill needs reform.”

Cuomo has consistently criticized a provision in Trump’s 2017 tax overhaul that imposed a $10,000 limit on the federal income tax deduction for state and local taxes, or SALT. The cap effectively raises federal taxes on people who pay more in property taxes and state income tax. It hit especially hard in states with higher home prices and tax rates such as New York, New Jersey and California.

Trump reinvigorated hopes that the provision would be lifted or adjusted last week when he told reporters he was “open to talking about” revisions to the cap.

But Senate Finance Committee Chairman Chuck Grassley of has downplayed Trump’s remarks, saying that his committee wouldn’t reopen the issue.

The cap has become a major issue in the Northeast.

Representatives Bill Pascrell, a New Jersey Democrat, and Pete King, a New York Republican, have both pressed legislation to restore the deduction. But Republican congressional leaders argue that it primarily benefits Democratic-leaning higher-tax states.

Some Democrats are also concerned that fully restoring the deduction -- at a price tag of $620 billion, according to the Urban-Brookings Tax Policy Center -- would mostly help the wealthy at a time the party is focusing on tax plans to combat income inequality.

Cuomo has blamed income tax revenue shortfalls in the state -- down $2.3 billion in December and January -- on high-income residents leaving for second homes in lower-tax Florida, encouraged in part by the change in the federal tax law.

The Republican rollback of the deduction appeared to play a role in the party’s midterm election losses.

In three of the states most affected -- California, New Jersey and New York -- Republicans lost 14 U.S. House seats, accounting for about a third of the party’s overall losses. Additionally, two lawmakers key to crafting the Republican tax overhaul -- former Representatives Erik Paulsen of Minnesota and Peter Roskam of Illinois -- lost their seats after campaigns in which the unpopularity of the new law was a major issue.

Still, Jack Peterson, the deputy director of government affairs at the National Association of Counties, said that with bipartisan support in the House and Trump showing interest “to be part of some of the bigger conversations,” the deduction limit may be changed.

Political interest in the issue is rising during the tax filing season, the first under the new tax law, as some taxpayers who were expecting to get a refund are finding out they instead owe money to the Internal Revenue Service.

“You keep hearing how upset people are, and how people aren’t getting the refunds they expected,” said Michael Mundaca, the co-leader of Ernst & Young LLP U.S.’s national tax department. “I think we’ll see talk, but I don’t think it will move through the current legislative environment.”

“The president is obviously very proud of the tax bill, and Republicans are not ready to start looking at ways to roll back any of its provisions,” said Jonathan McCollum, the director of federal government affairs for Davidoff Hutcher & Citron, a New York law firm with a Washington office. “With the administration and this Congress, it’s not likely to happen.”

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