When congressional Republicans capped the deductibility of state and local income taxes in a massive 2017 tax overhaul, Democrats were outraged.

But now they are divided, with progressives like Montgomery County Executive Marc Elrich saying Congress should limit the repeal of limitations on that popular tax break, so that the nation’s wealthiest taxpayers don’t receive a windfall.

“I think people need to tread carefully on this,” Elrich said. He also said he agreed with Sen. Bernie Sanders (I-Vt.) that a repeal “would be a tremendous gift to the very wealthy.”

In Montgomery County, the largest number of taxpayers taking advantage of that state and local tax (or SALT) deduction are not the very wealthiest, but those with taxable incomes of between $100,000 and $200,000.

According to 2018 Internal Revenue Service data, 137,030 federal income tax filers in Montgomery County who itemized their deductions made use of the state and local income tax break.

The largest number of those filers — about 47,500 — reported incomes of between $100,000 and $200,000. About 45,300 filers who claimed those deductions earned $200,000 or more.


The county’s wealthiest taxpayers, however, would receive much larger tax breaks from a SALT cap repeal than those in lower income tax brackets.

Harvard economics professor Jason Furman posted on Twitter that “the majority of Americans with a net worth of $50 [million] to $300 million would get a tax cut under the Build Back Better plan with a full repeal of SALT.”

“The bill would do more for the super-rich than it does for climate change, childcare or preschool. That’s obscene,” Furman tweeted.


The 2017 tax overhaul capped the deductibility of state and local taxes, which in Maryland are generally property taxes, at $10,000 per individual filer and $10,000 for joint filers.

That cap did not affect many taxpayers in lower-income, lower-tax states like Alabama or Missouri, but states that have high incomes and high taxes, like Maryland, Connecticut, New York, California, and New Jersey — states that also trend Democratic — complained they were being disproportionately punished.

“Almost half of all MDers use the state and local tax deduction – nearly 1.3M in 2015. This will (increase) taxes for millions of working families,” Sen. Chris Van Hollen (D-Md.) posted on Twitter in October 2017, when the GOP tax overhaul was under debate in Congress.


The SALT cap deduction has had a definite impact in Montgomery County. In 2017, the year before it was implemented, nearly twice as many federal filers in the county, 256,490, claimed the deduction compared with 2018, the first year the tax went into effect.

Various proposals are under discussion in Congress this week to repeal the SALT cap.

One would allow unlimited state and local tax deductions for people earning up to $400,000 with a limited phase out for those earning up to $500,000.


That may win Elrich’s support. He said the final plan should not be an “all-or-nothing thing” and that Congress should “target” the repeal.

Another proposal promoted by some Democrats would pair the repeal of the SALT cap with an expanded “alternative minimum tax,” a levy that was nearly eliminated in the 2017 tax law. It was once used to prevent the very wealthy from claiming so many deductions that they owed no federal tax.

While Van Hollen once supported a total repeal of the SALT tax, he seems to favor something more “targeted” now.


“Senator Van Hollen supports providing targeted relief to hardworking families who need the SALT deduction the most — to prevent Marylanders from being double-taxed — and is committed to working with his colleagues to include this in the Build Back Better bill,” a Van Hollen spokeswoman said.

Sen. Ben Cardin (D-Md.) has previously supported a full repeal of the SALT cap.

On Wednesday, Cardin spokeswoman Sue Walitsky wrote in an email: “Middle-income Maryland families deserve some relief from the double taxation that occurs when the federal deductions for state and local taxes (SALT) are capped. Senator Cardin would support a solution that is fair to these families.”