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SALT Cap Removal Will Hinge on Democratic Leaders

Posted on Feb. 8, 2021

Pressure is building on some Democratic lawmakers to repeal the $10,000 state and local tax deduction cap, but its inclusion in an upcoming relief package will likely rest in the hands of congressional leaders.

The Senate and House both approved the legislative vehicle on February 5 that will be used to move a $1.9 trillion relief package. The budget reconciliation process will allow Democrats to approve a large package with a simple majority and include provisions that are unlikely to receive bipartisan support.

House Ways and Means Committee member Thomas R. Suozzi, D-N.Y., said he hopes that repealing the SALT cap will be one of the provisions that will make its way into the package. “Chuck Schumer is gonna be the guy to determine whether we get it done or not,” Suozzi told Tax Notes, referring to the Senate majority leader.

Suozzi, who represents parts of Long Island, said repealing the cap that was implemented by the 2017 Tax Cuts and Jobs Act has many allies, but none more important than Schumer. “It’s not a member thing, it’s a leadership thing at this stage,” Suozzi said.

Schumer introduced legislation along with Suozzi (S. 85, H.R. 613) to repeal the cap and has tried to use his authority in the past to raise awareness of the high tax bills his constituents face. But that doesn’t mean internal lobbying to sway members to vote for repeal isn’t still happening.

“We’re just sending letters and trying to get support,” said Ways and Means Committee member Bill Pascrell Jr., D-N.J. Adding a SALT cap repeal provision to the package may have to wait until the most important points are agreed upon by Democrats, such as economic impact payments, unemployment insurance expansion, and state and local funding.

Suozzi said lawmakers are “focused on getting through the big-picture stuff that we’re doing right now and there will be a lot more wrangling in the weeks ahead.”

With Democrats holding control of all three branches of government for the next two years, time is of the essence. But Ways and Means Committee member Daniel T. Kildee, D-Mich., said disagreements exist on when to get the repeal done.

“I’ve heard some angst between members whether they can get this done right now and which vehicle is the most appropriate to get this done,” Kildee said. “They’re just feeling a lot of pressure.”

Republicans have been critical of Democratic efforts to repeal the cap, arguing that it benefits wealthy taxpayers the most. But criticism has also been leveled at Democrats by progressive think tanks for the same reason.

Sen. Chuck Grassley, R-Iowa, Finance Committee member and the former chair, tried to divide the caucus during a marathon voting procedure, but that effort fell flat.

Grassley offered an amendment to the budget reconciliation bill to prevent a temporary repeal of the SALT deduction cap. Although nonbinding, the amendment was defeated 49 to 51, with all Democrats and Rand Paul, R-Ky., voting against the proposal.

Despite the united front, there may not be enough bandwidth for a SALT cap removal proposal in a relief package at the moment, as members urge a quick process to get help to people. That may require those pushing for a proposal to remove the SALT cap to wait for another reconciliation bill expected before the 2022 midterm elections.

Kildee, who serves as chief deputy whip of House Democrats, understood the concern of some of his colleagues from states affected by cap. But he said that Democrats will have “another bite at the apple,” adding, “There will be another chance” to pass legislation.

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