House panel to consider temporarily repealing SALT deduction cap

The House Ways and Means Committee is scheduled on Wednesday to consider legislation that would temporarily repeal a portion of Republicans’ 2017 tax-cut law, which is disliked by politicians in Democratic-leaning high-tax states.

The bill — offered by Reps. Tom Suozzi (D-N.Y.), Mike Thompson (D-Calif.) and Bill Pascrell (D-N.J.) — would repeal the $10,000 cap on the state and local tax (SALT) deduction for 2020 and 2021. It also would raise the cap to $20,000 for married couples in 2019.

To offset the costs of the changes to the SALT deduction cap, the bill would raise the top individual income tax rate from 37 percent to its pre-GOP tax law level of 39.6 percent, and it would also lower the income threshold for where that top bracket starts. The proposed changes would be in effect from 2020 through 2025, after which time the individual tax changes in the 2017 law, including the SALT deduction cap, expire.

The rollout of the bill and announcement of the committee markup, which came late Monday, comes after a group of House Democrats from high-tax states formed a working group on the SALT deduction cap earlier this year. The Ways and Means Committee also held hearings on the issue in June.

Democrats argue that the cap has hurt residents in their states and also makes it harder for their states to offer public services. A small number of GOP House members from blue states also voted against the 2017 tax law because of concerns about the SALT deduction cap.

However, most GOP lawmakers support the cap, arguing that it helps to prevent the federal tax code from subsidizing higher state taxes. GOP lawmakers note that most people, even those in high-tax states, got a tax cut in 2018 under the new law. Many Republicans, as well as some liberal tax-policy experts, have been critical of Democratic efforts to undo the cap, reasoning that doing so would largely benefit high-income taxpayers.

The bill could pass the Democratic-controlled House, but may not be able to pass the GOP-controlled Senate. In October, Democrats forced a vote in the Senate on a resolution to overturn regulations related to the SALT deduction cap, but the resolution failed on a largely party-line vote.