Democrats revive push to end SALT cap with COVID relief
WASHINGTON — With a new Senate majority, Democrats are again pushing to repeal a cap placed on state and local tax deductions as part of pandemic relief efforts, a change that will benefit residents of high tax states like New York, New Jersey and Connecticut most.
“In my district, the third district in Connecticut, 87,800 homeowners can no longer deduct their full property taxes like they could before 2018,” said Rep. Rosa DeLauro, D-3, chair of the House Appropriations Committee, on Friday. “I support repealing the SALT cap and believe that it should be enacted at the earliest opportunity.”
Senate Majority Leader Charles E. Schumer and Sen. Kirsten Gillibrand, DN.Y., introduced legislation Friday, co-sponsored by Sen. Richard Blumenthal, DConn., to nix the $10,000 limit on how much in state and local taxes (SALT) people can deduct from their federal taxes. Schumer said repeal was even more urgent due to the economic hardships caused by the pandemic.
"We’re going to push hard to repeal it,” Schumer said Friday afternoon. He called repealing the cap his “number two” priority for fiscal relief, after state and local government aid.
Blumenthal said he hoped the Senate will start passing COVID-19 relief, including the SALT cap repeal, through a process called reconciliation next week. That process only requires a simple majority to pass in both chambers, meaning Democrats could pass it with no Republican votes.
“I have no patience for diminishing the package arbitrarily,” Blumenthal said Friday.“I welcome Republican cooperation and the door is open but only if the cooperation is real. We have no time to waste.”
A repeal of the SALT cap will likely be another roadblock for strong Republican support for Biden’s $1.9 trillion coronavirus relief proposal. Many Republicans view eliminating the cap as another "blue state bail-out."
“At a time when the federal government is spending trillions of dollars to restart the economy, it makes absolutely no sense to give six figure tax cuts to the highest earners in high-tax states, especially as those very states are coming to Congress with their hand out," said Sen. Chuck Grassley, R-Iowa. "Taxpayers in fiscally responsible states like Iowa would be left picking up the tab for the wealthiest New Yorkers and Californians.”
SALT cap repeal does win support from some Republicans based on their geography. New Jersey's bipartisan congressional delegation sent a letter to Schumer and Speaker Nancy Pelosi, D-Calif., arguing for a repeal of the cap Wednesday.
Eliminating the SALT cap has the greatest impact on upper income earners, according to the Tax Policy Center. It would reduce federal revenues costing the government about $185 billion over 10 years, according to Joint Committee on Taxation estimates.
"Raging Covid, Main Street businesses closing, millions of jobless. What’s the answer, say Democrats: 'We need a huge tax break for the wealthy,'" said Rep. Kevin Brady, R-Texas, ranking member on the House Ways and Means Committee. "Half of SALT repeal goes to millionaires."
The SALT cap was instituted in 2017 as part of the Republican tax bill. Republicans passed that legislation through reconciliation, a process that allowed them to pass the bill in the Senate with a simple majority, instead of 60 votes. Struggling to find much bipartisan support for their large coronavirus relief package, Democrats may end up trying to pass that measure, including the SALT cap, through the same means.
Repealing the SALT cap has been a longstanding goal of Democrats from blue states with higher state taxes. Democrats also included a SALT cap repeal in the coronavirus relief bill they pass in the House in May. They argue it is unfair because it results in double taxation of the same income.
In 2017, the last year the full deduction was in place, 321,620 tax returns were filed claiming the state and local tax deduction, according to data released by the Internal Revenue Service.