House Democrats Working to Nest SALT Cap Repeal into Reconciliation Package

 After weeks of debate, House Democrats are working to nest either a sunset clause or outright repeal of the State and Local Tax Deduction (SALT) cap enacted via the Trump-era tax cut into the final multiple-trillion reconciliation package pending in Congress.

In a statement released Tuesday, Democratic Representatives Gottheimer, Suozzi, and Sherrill said they are committed to repealing the SALT cap, which they claim harms their constituents including those in the middle and lower classes.

“The cap on the SALT deduction remains a punishing blow to our home states of New York and New Jersey as we work to recover from the pandemic and get our economies on strong footing and our constituents back to work…We will continue to work with House and Senate leadership to ensure the cap on the SALT deduction is repealed.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 wrote.

The cap, which is scheduled to expire in 2026, limits the amount by which high-earners can deduct their state and local property, sales, or income taxes from their federal tax filings to $10,000. Before the Trump tax cut set a ceiling for it, the SALT deduction was unlimited and disproportionately benefited wealthy households residing in Democratic-dominated, high tax states. Ninety-one percent of the cushion of the SALT deduction was received by those with income above $100,000 and concentrated in six states: California, New York, New Jersey, Illinois, Texas, and Pennsylvania, according to the Tax Foundation.

If not a full elimination of the cap, the Democrats are also considering a 5-year SALT deductibility cap delay, per multiple sources, with the final decision to be released Tuesday afternoon, Punchbowl News reported.

Hearing of the Democrats’ plans to draft a SALT cap repeal to add to the reconciliation package, Senator Bernie Sanders, who has often advocated for the wealthy to pay higher taxes, slammed his colleagues for attempting to negotiate it.

“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 tweeted Tuesday.

“I am open to a compromise approach which protects the middle class in high tax states. I will not support more tax breaks for billionaires,” the Vermont senator added.

Repealing the SALT cap altogether would come at a cost to the Treasury of roughly $85 billion per year, and about $350 billion in total, the Committee for Responsible Federal Budget calculated. The $85 billion annual cost to the federal government of lifting the cap would be five times larger than the reconciliation plan’s universal pre-K plan, almost eight times as large as providing free community college, and over three-quarters as large as the cost of extending the expanded child tax credit.