NY House Democrats demand repeal of SALT cap

House Democrats from New York on Tuesday escalated their push for the repeal of the cap on the state and local tax deduction, threatening to oppose future tax legislation that doesn’t fully undo the $10,000 limit.

“As members of the New York Congressional Delegation, we urge you to insist on full repeal of the limitation on the State and Local Tax (SALT) deduction passed by Congress in 2017 and signed into law by former President Trump,” the lawmakers wrote in a letter to House Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Steny Hoyer (D-Md.). “This issue is so critical to our state and our constituents that we will reserve the right to oppose any tax legislation that does not include a full repeal of the SALT limitation.”

Every Democrat in New York’s House delegation signed the letter except Reps. Alexandria Ocasio-Cortez and Kathleen Rice.

Republicans created the limit on the SALT deduction in their 2017 tax cut law in an effort to help raise revenue to offset the cost of other provisions in the measure. The cap has been opposed by lawmakers on both sides of the aisle in high-tax states such as New York, New Jersey and California.

The New York lawmakers said in their letter Tuesday that repealing the limit on the deduction would help the state’s economy rebound from the coronavirus-related downturn.

“Restoring the SALT deduction would ensure that the state is able to recover as quickly as possible without sacrificing the benefits on which our residents rely,” the lawmakers wrote.

The letter comes after President Biden recently proposed a $2.25 trillion infrastructure package that would be paid for by corporate tax increases. Several New York and New Jersey Democrats had already said prior to the release of the letter that they would not support an infrastructure proposal unless the SALT deduction cap was addressed.

Democrats from high-tax states have leverage in negotiations over infrastructure legislation since the House has only a narrow Democratic majority and Republicans are expected to oppose Biden’s package.

But it could be challenging to include a repeal of the SALT deduction cap in an infrastructure bill because doing so would increase the price tag of the package. Additionally, economic policy experts across the ideological spectrum have estimated that repealing the cap would primarily benefit high-income taxpayers.