Democrats forge compromise deal to ease SALT tax deduction cap
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Democrats have forged a compromise to partially lift the so-called SALT tax deduction cap that hit the New York metro area particularly hard.
The deal, which was included in President Biden’s sprawling Build Back Better plan late Thursday night, would raise to $80,000 the annual amount of state and local taxes that taxpayers can deduct on their federal returns.
The relaxed cap, an increase from the current $10,000 limit, would last for a decade until 2031.
The SALT deal appeared to remove one obstacle to passing the sprawling $1.9 trillion spending plan in the House of Representatives. But on Friday afternoon Democrats delayed a vote on the bill amid intraparty squabbles pitting moderates against progressives.
A handful of Democratic lawmakers, mostly moderates from the New York and New Jersey suburbs, had threatened to scuttle the bill if their concerns about the SALT cap were not addressed.
They wanted to simply eliminate the cap, which was enacted by Republicans as part of President Donald Trump’s 2017 tax cuts. Democrats complained that the cap intentionally targeted high-tax blue states like New York and New Jersey.
Progressives like Sen. Bernie Sanders (I-Vt.) have pushed back hard against restoring the deduction in full because the greatest benefits would go to high income people who pay outsized state income and property tax bills.
Moderates like Rep. Josh Gottheimer (D-N.J.) and Rep. Tom Suozzi (D-N.Y.) say that the cap unfairly punishes many middle-class families in expensive areas like metro New York and California.
Despite the breakthrough, easing the SALT cap is still far from certain to become law.
Even if the bill passes the House, the Senate will likely make significant changes to the bill. Key moderates Sen. Joe Manchin (D-W.V.) and Sen. Kyrsten Sinema (D-Ariz.) have expressed concerns about whether there will be enough new taxes to pay for it, potentially raising questions about whether they will go along with the revenue-reducing deal.
