Treasury Secretary Nominee Janet Yellen Ducks Questions on Raising the SALT Cap

the staff of the Ridgewood blog

Washington DC, the federal government will need to “act big” to address the financial fallout from the coronavirus pandemic and efforts should include funding for state and local governments, said Treasury Secretary nominee Janet Yellen during a Senate confirmation hearing Tuesday.

Yellen, who chaired the Federal Reserve from 2014 to 2018, was quizzed Tuesday about her stance on a wide range of economic policies that could be taken up by the Biden administration including the idea of repealing the  cap on state and local tax deductions.

The sweeping tax overhaul Republicans pushed through in 2017 limited the amount of state and local tax payments that individual taxpayers could claim on their federal tax returns to $10,000.

State and local government groups fought that policy change, arguing it amounted to double taxation and would make it harder for states and localities to impose and raise their taxes to help pay for projects and services. Elected leaders from Democratic-leaning states with higher taxes, including New York, New Jersey and California, have complained that the “SALT” cap unfairly targeted their taxpayers and have advocated for its repeal.

Democrats pursued a repeal of the SALT cap in their coronavirus relief package.

When asked by Sen. Chuck Grassley, the Republican chairman of the committee, whether the repeal should be included in coronavirus relief legislation, Yellen declined to endorse a specific approach and said more study of the issue was warranted.

“Before making a decision about what should be done going forward, I think it is critical to study and evaluate what the impact has been on state and local governments and their ability to provide critical services,” she said. “I promise to work with those in Treasury and throughout the administration on evaluating what impact that has had on states and local governments, households and small businesses.”