Battle Looms Over Trump's SALT Cap On State, Local Tax Deductions (Dreamstime)
By Cathy Burke | Sunday, 18 April 2021 02:49 PM
A battle is looming in Congress over former President Donald Trump’s cap on state and local tax deductions — and it could derail President Joe Biden’s $2 trillion infrastructure plan.
A group of House lawmakers, calling itself the SALT Caucus, wants to reverse the cap and is pushing to include the restoration as part of the administration’s massive spending bill for infrastructure.
SALT — part of Trump's 2017 tax cut — put a $10,000 cap on federal deductions for state and local tax. The caucus said the cap resulted in increased tax bills in New York, California, and other high-tax states.
"This issue is so critical to our state and our constituents that we will reserve the right to oppose any tax legislation that does not include a full repeal of the SALT limitation," the newly formed group said in a letter.
"Repealing the SALT limitation is a question of fundamental fairness. With the SALT limitation in place, New Yorkers—who already send $40 billion more in taxes to federal coffers than the state receives in return—face the manifestly unfair risk of being taxed twice on the same income," said Rep. Jerrold Nadler, D-N.Y. "Now, as New York State reckons with the vast economic impact of COVID-19, including a workforce depletion of more than one million jobs, eliminating the SALT limitation is imperative. I and many of my colleagues from New York stand prepared to work with House Leadership to restore the SALT deduction. We are equally prepared to oppose any legislation that fails to do so."
For Biden to eliminate the cap as part of his spending plan, there would have to be "a discussion about how that would be paid for, what would be taken out instead," Jen Psaki, White House press secretary, said last week, Business Insider reported.
"As you also know — just with our little calculators out — it is not a revenue raiser, and so it would add costs — and potentially significantly — to a package,” she said.
One lawmaker who wasn’t on board was Rep. Alexandria Ocasio-Cortez, D-N.Y.
"I don't think we should be holding the infrastructure package hostage for a 100% repeal of SALT," Ocasio-Cortez, of New York, BI has reported, citing a pool reporter.
Eliminating the SALT cap would likely lower taxes for the wealthy, according to BI, since they could claim higher deductions on their federal returns. But it could also raise the cost of Biden's plan, making it more difficult for House Speaker Nancy Pelosi to usher the plan through the House.
Rep. Josh Gottheimer, D-N.J., a member of the new caucus, also spoke out, asserting it was "high time that Congress reinstates the State and Local Tax deduction, so we can get more dollars back into the pockets of so many struggling families — especially as we recover from the pandemic,” BI reported.