Democratic lawmakers appeared to near a deal on the so-called “Salt” cap on federal tax deductions for state and local taxes on Tuesday, in a win for House moderates from wealthier states who have long railed against the policy.
Donald Trump’s 2017 tax reforms limited the amount households could deduct in state and local property taxes from their federal income tax at $10,000, in a move that hit homeowners in states with high state and local property taxes, such as New York, New Jersey and California. Critics accused the then-president of unfairly punishing voters in “blue” states that voted against him 2016.
A small group of House Democrats, led by Josh Gottheimer of New Jersey, have led efforts to include a reversal of the tax changes in President Joe Biden’s “Build Back Better” plan, threatening to withhold support for the wider bill unless the cap is eliminated. But progressive critics have opposed the move, saying it would disproportionately benefit rich Americans.
Lawmakers seemed to be nearing a deal to scrap the cap for five years on Tuesday. Democrats on Capitol Hill are now weighing a five-year suspension of the cap, through 2025, retroactively applied to include the current tax year, according to one person briefed on the negotiations.
Gottheimer issued a joint statement on Tuesday with fellow New Jersey Democrat Mikie Sherrill and New York Democrat Tom Suozzi, saying the cap “remains a punishing blow to our home states . . . as we work to recover from the pandemic and get our economies on strong footing and our constituents back to work”.
“Today’s news is encouraging for a Salt cap repeal to be included in the final reconciliation package,” they added, saying they would “continue to work” with Democrats in the House and Senate on the issue.
But it remained unclear whether all 50 Democratic senators would sign up to such a move. Bernie Sanders, the progressive Vermont senator, issued a scathing statement on Tuesday evening saying “the last thing we should be doing is giving more tax breaks to the very rich”. Sanders said he was “open to a compromise approach” to protect the “middle class in high tax states”, but added: “I will not support more tax breaks for billionaires.”
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