Sen. Schumer Seeks a Tax Cut For the Rich Over Common Good
National crises such as this one should be a time for all Americans to band together and work for the good of the country as a whole. Unfortunately, Senate Minority Leader Chuck Schumer (D-NY) has clearly staked out a position of defending the interests of his home state at the cost of other Americans.
When the Tax Cuts and Jobs Act (TCJA) passed at the end of 2017, one of the provisions that provoked the most ire among high-tax states was the capping of the state and local tax (SALT) deduction at $10,000. Limiting the benefit taxpayers could receive from the SALT deduction primarily affected the wealthiest Americans — prior to the TCJA, 84 percent of the benefits of the deduction went to taxpayers with adjusted gross incomes above $100,000.
This policy represented a significant hit to high-tax states like New York. These states saw the SALT cap as a threat to their revenue streams, as their taxpayers could no longer offset as much of their high tax burdens through their federal taxes. Of course, the fact that the SALT deduction incentivized higher state taxes was a major reason for the cap in the first place.
These high-tax states have tried to reverse this change for some time, most notably through a specious lawsuit. Now, Senator Schumer is attempting to piggyback on Phase Four coronavirus relief efforts to quash the SALT cap. Ignored by the Senator is the fact that repealing the deduction would do nothing at all to aid Americans struggling with the economic effects of the pandemic — the bottom 80 percent of taxpayers would receive a measly 4 percent of the benefit should the SALT cap be repealed. A sales tax holiday on yacht purchases would be about as effective in terms of tax relief for average Americans.
At the same time, there is something easy that Congress can do to aid Americans affected by the pandemic. The pandemic and its associated lockdowns have led many Americans to shift from in-office work to remote work. Ensuring that these impromptu remote workers are not hit with surprise tax changes should be a matter of bipartisan agreement.
After all, the millions of Americans that are currently working remotely in a state other than their normal offices are technically incurring new tax liabilities. Absent Congressional intervention, these remote workers can face tax assessments that they are unprepared for, as well as potentially double-taxation.
The Senate Health, Economic Assistance, Liability Protection and Schools (HEALS) Act attempted to address this issue through legislation that would ensure that temporary, coronavirus-induced remote work would not incur new tax liabilities. Unfortunately, Senator Schumer’s home state has been a particularly bad actor in this regard, and the Senator has thus far been blocking Congressional relief efforts.
Most egregiously, New York repaid the generosity of American medical volunteers who risked a great deal to travel to New York City during its crisis period by hitting them with tax assessments due to time worked in the state. Governor Andrew Cuomoresponded to criticism of this policy by stating callously that he was “not in a position to provide any subsidies right now.”
New York also enforces a so-called “convenience of the employer” rule. This rule requires taxpayers previously working in a New York-based office that switch to remote work in a different state to pay New York state taxes so long as they could conceivably do that work in New York.
Not only is this rule illogical, it threatens to subject taxpayers to double taxation. For example, Connecticut provides a tax credit for taxes paid to other states, but only on income earned outside the state of Connecticut. When New York claims taxes from an employee working remotely in Connecticut, it is dooming that taxpayer to paying taxes on the same income to two states.
The HEALS Act includes provisions that would address both these problems, ensuring that states like New York cannot double-tax Americans or target volunteers with new burdens, while simplifying tax rules for remote-working taxpayers. It’s common sense language that would save taxpayers headaches as a result of the simple act of complying with lockdowns and social-distancing guidelines. Common sense for anyone willing to put the interests of Americans writ large over the interests of a single state government, that is.