Schumer Pledge to End SALT Cap Signals Strained Tax Talks Ahead

Senate Majority Leader Chuck Schumer (D-N.Y.) would end the state-and-local tax deduction cap if he remains in control of the Senate after the November election, setting up a showdown over one of the most contentious tax provisions at stake next year.

Republicans imposed the $10,000 state-and-local tax deduction limit in the 2017 tax overhaul, drawing opposition from GOP members from high-tax states. Since then, the cap has spurred intra-party battles among both Democrats and Republicans. The deduction is crucial to New York and California members from both parties, but resonates less with lawmakers and taxpayers in other parts of the country.

The cap is one of several tax provisions that expire at the end of 2025, along with a slate of other individual tax cuts. If either party holds a slim majority or there’s divided government, votes from high-tax state lawmakers will be key to passing a tax package next year.

“As long as I’m leader, when the state and local deductibility [cap] expires, it will be gone,” Schumer told reporters Tuesday in Chicago during the Democratic National Convention.

More than two dozen lawmakers are members of the bipartisan SALT Caucus, which aims to get rid of the cap. The caucus already was meeting before Congress left for August recess to plot for 2025, and some members said they want to ensure the cap expires.

“I hope we have the leverage there,” Rep. Brad Schneider (D-Ill.) said earlier this summer. “It’s an unfair tax. It’s a punitive tax, and it should be repealed.”

Republicans in 2017 included the limit in their tax bill as a way to partially offset the trillions of dollars of tax cuts. High-tax state Democrats and Republicans have both tried and failed since then to get rid of or raise the cap.

Democrats from New York and New Jersey had tried to get a SALT fix in the 2022 tax-and-climate law, but that was a nonstarter for Sen. Joe Manchin (I-W.Va.) in the Senate. Some progressive Democrats also have called the deduction a giveaway to the rich.

New York and California Republicans fought several times over the past to raise the cap. Earlier this year, they demanded a vote on a bill to double the cap for joint filers, which failed to clear a procedural vote in the House. While much of the GOP caucus opposes the deduction, blue-state Republicans say they see their best chance at finding a solution next year.

Rep. Mike Garcia (R-Calif.) said in July that the extent of leverage they have will be determined by the size of the majority, but noted the circumstances are on their side. If lawmakers can’t come to a deal next year, the cap will sunset.

“It turns into a pumpkin at the end of 2025,” Garcia said, referring to the SALT cap, “so we should be able to get something out of it.”

—With assistance from Jonathan Tamari (Bloomberg Government).