Much-hyped legislation introduced by House Democrats would temporarily repeal the $10,000 state and local tax deduction cap, but its prospects for passage seem dim.
The Restoring Tax Fairness for States and Localities Act (H.R. 5377), introduced late December 9 by House Ways and Means Committee member Thomas R. Suozzi, D-N.Y., was a long time in the making and the culmination of dozens of meetings between committee members and Democratic lawmakers from states severely affected by the cap. A committee vote on the bill is expected December 11.
The measure is unlikely to gain any votes from Republicans, and Ways and Means ranking member Kevin Brady, R-Texas, has on several occasions voiced his opposition to removing the cap.
The bill, which faces long odds in the Senate, is only a temporary fix. It would repeal the SALT deduction cap, established by the Tax Cuts and Jobs Act, for 2020 and 2021. It would also eliminate the marriage penalty for 2019 by increasing the SALT cap to $20,000 for a married couple filing jointly.
A Joint Committee on Taxation report estimates that the bill would cost the government about $184.5 billion over a 10-year period. The cost would be offset by increasing the top individual tax rate back to 39.6 percent from 37 percent, which would bring in $190.7 billion in additional revenue over 10 years.
A substitute amendment to the bill released late December 10 by Ways and Means Committee Chair Richard E. Neal, D-Mass., would double to $500 the above-the-line deduction for specified expenses of teachers and first responders. The JCT estimates the amendment would add $3.8 billion to the bill’s cost over 10 years.
In a new analysis, the Center on Budget and Policy Priorities said repealing the SALT cap would “overwhelmingly benefit high-income households,” and it suggested that modest changes to the cap, like raising it to $20,000 for all filers or exempting specific taxpayers, would be less costly.
Democrats from blue states have complained that the SALT cap is a direct hit on their constituents. According to the Urban-Brookings Tax Policy Center, 19 out of the top 20 districts affected by the cap are held by Democrats.
Lawmakers backing the bill are now hoping a floor vote can be held in the limited time left before the end of the year. That may be more complicated after Neal announced December 10 that a compromise was reached between congressional Republicans and Democrats and the White House over the United States-Mexico-Canada Agreement. Neal said there is no reason for delays in getting the trade deal to the House floor as soon as possible.