House Democrats continue to search for a way to satisfy lawmakers who want to scrap the deduction limit on state and local taxes without losing progressives wary of a tax cut that would overwhelmingly benefit the wealthy.
The budget blueprint Democrats passed this summer instructs lawmakers to include some form of SALT cap relief in a tax-and-spend plan of up to $3.5 trillion.
A full repeal would be costly and politically difficult to pass with razor-thin margins in both chambers. But a coalition of lawmakers from New York, New Jersey, and other states with high tax rates continue to insist that is what it will take for them to back the legislation.
“I will support my progressive friends and the Democratic caucus on big bold initiatives, on getting things done to improve people’s quality of life,” Representative
Suozzi is one of the leaders of the “SALT Caucus”, an alliance of more than 30 lawmakers who want to roll back the $10,000 deduction limit established in the Republican-led 2017 tax law. While they argue that the cap unfairly targets Democrat-dominated states and encourages people to move to Florida and other low-tax states, progressives counter that expanding the deduction shouldn’t be a priority in a social spending bill because the lion’s share of the benefit would go to the wealthy.
The House tax-writing panel is taking a phased approach to its part of the tax-and-spend plan, starting a multi-day markup Thursday with consideration of proposals on health care, paid leave, and retirement savings.
“We are still working through the tax provisions,” said California Representative
A full repeal isn’t realistic because of how much it would cost, Manley said. The Tax Foundation, a right-leaning think-tank, has estimated a full repeal of the cap would cost $380 billion. The size and scope of the overall reconciliation package is already dividing Democrats, with moderate lawmakers like West Virginia Senator
“Unless they want to be responsible for tanking the President’s legislative agenda, the ‘No SALT, No Deal’ caucus is going to have to figure out a Plan B,” Manley said. “I can’t imagine they are going to get everything they want.”
Options to lower the price tag include raising the deduction limit instead of lifting it completely or pursuing a short-term repeal of the cap.
In 2019 Suozzi sponsored legislation that aimed to double the cap to $20,000 that year for married couples filing jointly, then temporarily repeal the cap for the following two years. Both of those changes would only have applied to people making under $100 million a year.
That bill passed the House, but 16 Democrats voted against it, including New York Representative
The nonpartisan Joint Committee on Taxation has estimated that repealing the SALT cap would cut taxes for more than 13 million people, but 99% of the benefits would go to people earning $100,000 or more.
New Jersey Representative
“This is an existential threat to Jersey,” Gottheimer said.
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