Senate Democrats lose bid to kill IRS deduction rule
WASHINGTON — The Senate on Wednesday rejected a Democratic attempt to give relief to people hit hardest by new limits on how much of their state and local tax bill they can deduct from federal taxes.
The regulations were a key part of the GOP’S 2017 tax code overhaul, limiting the deduction permitted for state and local taxes to $10,000.
Republicans defeated the Democratic move on a 52-43, mostly party-line vote.
The state and local tax, or SALT, provision was a major revenue-raising piece of the 2017 law. But it caused an uproar and cemented Democratic opposition to the measure because capping the SALT deduction was seen in part as an assault on blue states with high concentrations of upper-bracket taxpayers.
“It’s hurt so many people in New York who are middle class, not wealthy, and in suburbs throughout the country,” top Senate Democrat Chuck Schumer of New York said. “And, by the way, it’s probably one of the major reasons the House flipped from Republican to Democrat. So many of those districts in New Jersey and California, New York, and Pennsylvania were affected by this cap and people rebelled.”
Some high-tax states like New York and California had tried to create workarounds for taxpayers. In June, the IRS enacted a rule prohibiting those workarounds. The Democratic plan would have overturned that rule.
Republicans said that the failed measure would have benefited higher-income taxpayers.
“Repealing the SALT cap would give millionaires an average tax cut of $60,000. Meanwhile, the average tax cut for taxpayers earning between $50,000 and $100,000 would be less than $10,” said Majority Leader Mitch Mcconnell, R-KY.
“The middle-class Kentuckians I represent have zero interest in cross-subsidizing the tax bills of millionaires who live in Brooklyn and the Bay Area.”