Democratic governors urge Biden to remove SALT cap

A group of seven Democratic governors is adding to calls within the party urging President Biden to repeal the Trump-era cap on state and local tax (SALT) deductions.

In a letter sent to the White House on Friday, the governors, including New York’s Andrew Cuomo, California’s Gavin Newsom and New Jersey’s Phil Murphy, wrote that while the administration “has already taken incredible steps to ease the burden of more than a year of uncertainty caused by a global pandemic,” more must be done to fuel economic recovery.

“We must go further and undo the cap placed on State and Local Tax (SALT) deductions by the Trump Administration through the Tax Cuts and Jobs Act in 2017,” the governors argued. 

The rule, which was put in place by former President Trump to help offset some of his tax cuts, limits SALT deductions to $10,000. Lawmakers from high-tax, Democratic-leaning states have long blasted the cap and pushed to reverse it.

The governors on Friday argued, “For the first time since Abraham Lincoln created the federal income tax, the cap on SALT deductions established a system of double taxation, where 11 million Americans were forced to pay taxes on the amount they paid in State, local, and property taxes, to the tune of $670 billion over a decade.”

“Like so many of President Trump’s efforts, capping SALT deductions was based on politics, not logic or good government,” they asserted. “This assault disproportionately targeted Democratic-run states, increasing taxes on hardworking families.” 

“This was unacceptable then, and is simply untenable given the dire economic conditions caused by the pandemic,” the governors added. 

The Democrats said that while it “was heartening to hear Treasury Secretary Yellen agree to work with Congress to ease the $10,000 cap on SALT recently,” the Biden administration and members of Congress must “continue these efforts to relieve this immense financial burden on our residents and eliminate the SALT cap entirely.” 

The joint letter was also signed by Govs. Ned Lamont (Conn.), J.B. Pritzker (Ill.), Kate Brown (Ore.) and David Ige (Hawaii). 

A growing number of Democrats are aiming to put pressure on Biden to rescind the cap on SALT deductions, including House members who have threatened to withhold support from Biden’s $3 trillion infrastructure proposal if the limit is not removed.

On Tuesday, Democratic Reps. Thomas Suozzi (N.Y.), Bill Pascrell (N.J.) and Josh Gottheimer (N.J.) released a joint statement vowing to oppose any efforts to change the tax code unless the SALT deduction is restored.

House Speaker Nancy Pelosi (D-Calif.) on Thursday expressed optimism on including tax code reforms within Biden’s infrastructure package, though she stopped short of drawing a red line.

Pelosi said on a press call, “Hopefully we can get it into the bill. I never give up hope for something like that [that] means so much to the American people.”