Leading House Democrats said they remain committed to lifting the cap on state and local tax deductions for federal income tax, a goal for municipal issuers not initially included in the legislative language for the $3.5 trillion reconciliation bill now being crafted in the House.
House Ways and Means Chairman Richard Neal, D-Mass., released a statement Monday with Reps. Bill Pascrell, Jr., D-N.J. and Tom Suozzi, D-N.Y., saying that House Democrats are continuing to work on crafting relief to undo the so-called SALT Cap.
“With Speaker Pelosi, we continue to work among our colleagues and the Senate to undo the short-sighted capping of SALT by Republicans,” the congressmen said in
The lawmakers described President Biden’s Build Back Better plan as “one of the most significant bills Congress has ever considered," and asserted that the complex legislation will necessitate continuous shaping and crafting that will ultimately include SALT relief.
“We are committed to enacting a law that will include meaningful SALT relief that is so essential to our middle-class communities and we are working daily toward that goal,” Neal said.
Ushered in as part of Donald Trump’s 2017 Tax Cuts and Jobs Act, the SALT cap limits to $10,000 the amount of state and local taxes taxpayers can deduct from their federal obligations. The Ways and Means Committee unveiled a tax package on Monday that did not address the SALT deduction.
Several moderate Democrats, including Suozzi, have vowed not to support their party’s proposed $3.5 trillion budget reconciliation package unless it includes a SALT cap repeal. The issue is significant for lawmakers from high tax states, such as New York and New Jersey.
“No SALT, no deal,” Suozzi said in a
Repeal of the $10,000 cap is supported by a number of local government and public employee groups who say the cap constrains the ability of cities, towns, villages, and school districts to raise additional revenue.
Suozzi said that repealing the cap would lower the taxes of New Yorkers by upwards of $12 billion a year. “We need to have this state and local tax deduction,” he said, adding, “We built a whole system around it.”
But other House Democrats, like New York Rep. Alexandra Ocasio-Cortez, have argued against a full SALT cap repeal. She has called it a “giveaway to the rich.”
Meanwhile, the Joint Committee on Taxation reported that a full repeal of the SALT deduction would result in over $88 billion in lost revenue this year.
As Democrats try to come to consensus on budget reconciliation, Henry Connelly, spokesperson for House Speaker Nancy Pelosi, reiterated the importance of the SALT cap repeal.
“As work continues between the House, Senate and White House on this and other unfinished but critical items, fixing Republicans’ SALT cap attack on progressive state and local governments absolutely remains a priority for House Democrats in the final reconciliation package,” Connelly said.
