Democrats considering five-year repeal of SALT cap in spending bill

Democrats are considering including in their social spending package a five-year repeal of the cap on the state and local tax (SALT) deduction, sources told The Hill.  

Lawmakers are looking at repealing the $10,000 cap through 2025 and offsetting the cost of doing so by imposing the cap in subsequent years, according to a Democratic aide and a Democratic lawmaker familiar with the discussions.

Repealing the SALT deduction cap is a top priority for a number of House Democrats in high-tax states such as New York and New Jersey. Leading advocates for repealing the cap praised the development. 

“Today’s news is encouraging for a SALT cap repeal to be included in the final reconciliation package,” Reps. Josh Gottheimer (D-N.J.), Tom Suozzi (D-N.Y.) and Mikie Sherrill (D-N.J.) said in a statement.

“We will continue to work with House and Senate leadership to ensure the cap on the SALT deduction is repealed. No SALT, no deal. No SALT, no dice,” the lawmakers added. 

An agreement on the SALT deduction issue has yet to be finalized.

House Ways and Means Committee Chairman Richard Neal (D-Mass.) told reporters Tuesday that discussions on the SALT deduction cap are ongoing. He said the details of a deal depend in large part on Senate Majority Leader Charles Schumer (D-N.Y.). 

Changes to the SALT deduction cap are among the outstanding issues that Democrats are wrestling with as they work to finalize their social spending package.  

The topic was not included in the framework that the White House released last week. The issue is a challenging one for Democrats, with some lawmakers from high-tax states viewing repeal of the cap as a must-have and other lawmakers raising concerns about the benefits of repeal for high-income taxpayers.

The cap on the SALT deduction was created by Republicans’ 2017 tax cut law as a way to help pay for other tax provisions in that measure. It is currently set to expire at the end of 2025, along with other tax code changes for individuals. 

Supporters of the cap argue that it helps prevent the federal tax code from subsidizing higher state taxes. But opponents of the cap argue that it hurts residents of high-tax states and makes it harder for those states to provide robust public services.

Sen. Bernie Sanders (I-Vt.) called the idea of repealing the cap “beyond unacceptable.”

“At a time of massive income and wealth inequality, the last thing we should be doing is giving more tax breaks to the very rich. Democrats campaigned and won on an agenda that demands that the very wealthy finally pay their fair share, not one that gives them more tax breaks,” he added.

At a time of massive income and wealth inequality, the last thing we should be doing is giving more tax breaks to the very rich. Democrats campaigned and won on an agenda that demands that the very wealthy finally pay their fair share, not one that gives them more tax breaks.

— Bernie Sanders (@SenSanders) November 2, 2021

Scott Wong and Al Weaver contributed. Updated at 5:24 p.m.