Minnesota U.S. Rep. Dean Phillips has been working to repeal the cap on state and local tax deductions that has disproportionately hit residents in his district.
The Democrat, who was elected to Congress after defeating former GOP Rep. Erik Paulsen in the 2018 mid-terms, expressed his opposition to the changes implemented in the Trump Administration and Republican Congress' Tax Cuts and Jobs Act in 2017.
The bill introduced a $10,000 cap on the amount of state and local taxes (SALT) that can be deducted in annual tax returns, which has a disproportionate impact on higher-tax states like Minnesota, and in particular hit wealthier areas like Phillips' district, which covers the western Twin Cities suburbs.
Rep. Phillips, himself a millionaire, spoke before the House Ways and Means Committee about the "harmful impact" the SALT cap has had on the 3rd District earlier this year, and the committee passed the Restoring Tax Fairness for States and Localities Act by a vote of 24-17 on Wednesday.
The bill would eliminate the cap on SALT deductions in 2020 and 2021, with Phillips a co-sponsor of the bill.
Citing IRS stats, Phillips says his district ranks 35th out of 435 districts nationwide most impacted by the SALT cap, with the average SALT deduction in the district around $20,000.
He points out that unlike individuals, corporations are able to deduct the entirety of their SALT payments from their federal taxes.
"The 2017 Tax Cuts and Jobs Act was an irresponsible sugar rush that blew a hole in the deficit and came at a time when Congress should have been encouraging real, fair, and long-lasting prosperity," he said.
"The average tax filer in my district is being taxed twice on $10,000 of their annual income. That’s outrageous and it’s hurting economy, our schools, and our communities. I’m grateful to my colleagues on both sides of the aisle who listened when I shared Minnesota’s story and came together to propose this common-sense fix."
As well as the elimination of the SALT cap, the act proposed by Phillips would take action now, doubling the SALT deduction cap for married filers in 2019, and reinstating the top individual income tax rate (for those earning $427,000) to 39.6 percent from the current 37 percent.
The House is expected to take a vote on the bill shortly, but with the Senate in the hands of the Republican Party, the bill faces a challenge making its way into law.