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SALT Repeal Remains a Sticking Point

Posted on Aug. 5, 2020

Democrats continue to insist on repealing the $10,000 state and local tax deduction cap as part of a COVID-19 relief package despite criticism from Republicans that its benefits would flow only to the wealthy.

Senate Minority Leader Charles E. Schumer, D-N.Y., told reporters August 4 that the SALT cap unfairly affects blue states and that the two-year repeal included in the House-approved Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800) should stay in the package.

"It's very important to the states — it was done unfairly, and it affects middle-class people in the suburbs throughout America, Long Island, Westchester, [the] suburbs of Buffalo, and every other state,” Schumer said.

Repealing the cap has been a priority for Democrats since it was instituted under the Tax Cuts and Jobs Act, and the cause has found some Republican allies. The House passed a measure (H.R. 5377) in December 2019 that would temporarily repeal the SALT deduction cap despite concerns that the move would largely benefit wealthier taxpayers.

Senate Republicans have panned the idea from the beginning and have painted the SALT cap repeal as a giveaway to the rich. “They want a tax cut for millionaires and billionaires in their states,” said Finance Committee member John Cornyn, R-Texas. Think tanks including the Center on Budget and Policy Priorities have said repealing the SALT cap would be costly and regressive and benefit few middle-income households.

Cornyn said it would also mean that other states would have to subsidize the deduction. Finance Committee member John Thune, R-S.D., said the provision is a tax cut for Manhattan millionaires and doesn't belong in a relief package.

Senate Republicans are accusing Democrats of holding up the entire package because of the SALT proposal  despite their many differences on unemployment insurance and liability protection.

“We need to urgently help working families and those who’ve lost their jobs. But the Speaker and the Democratic Leader are blocking the entire rescue package over a special, unrelated tax cut for rich people in high-tax blue states,” Senate Majority Leader Mitch McConnell, R-Ky., said in a tweet.

Senate Republicans have been absent from negotiations with Democrats as the White House has taken the lead in discussing a deal with both sides. Treasury Secretary Steven Mnuchin told reporters after an August 4 meeting with House Speaker Nancy Pelosi, D-Calif., and Schumer that a deal within a week is possible.

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