Yesterday, the Parity for Main Street Employers coalition sent a letter to House tax writers raising serious concerns with their plan to provide temporary relief from the SALT deduction cap by permanently raising the top tax rate applied to pass-through business income.
The bill, titled the “Restoring Tax Fairness for States and Localities Act”, is scheduled to be considered by the House Ways & Means Committee today and voted on by the full House next week. The bill includes one year of marriage penalty relief and then repeals the SALT cap for two years, all paid for by increasing the top individual income tax rate of 37 percent to 39.6 percent and reducing the dollar amounts at which the 39.6 percent bracket begins.
The PMSE coalition raised serious concerns with the bill, particularly the restoration of the higher top tax rate that applies to pass-through businesses and individuals alike. As the letter states:
Individually and family owned businesses organized as S corporations, partnerships and sole proprietorships are the heart of the American economy. They employ the majority of workers, and they contribute the most to our national income. They also pay the majority of business taxes. A recent study by EY found that pass-through businesses pay 51 percent of all business income taxes.
The legislation introduced today would raise these taxes by 1) increasing the top rate pass-through businesses pay from the current 37 percent to 39.6 percent and 2) lowering the income threshold of the top rate from $622,050 to $496,600 (Joint) for the years 2020 through 2025, after which the 37 percent rate is scheduled to expire under current law.
You can read the whole letter here.