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SALT Deduction Cap Bill Expected Next Week

Posted on Dec. 5, 2019

Democrats are finally ready to roll out a bill addressing the $10,000 state and local tax deduction cap as they eye a floor vote before the end of the year.

The bill is expected to be introduced the week of December 9, followed immediately by a markup, according to House lawmakers.

Democrats exiting a House Ways and Means Committee meeting December 4 told reporters they’re hoping that a floor vote will happen before 2020. “I want that. I don’t think it should spill into next year,” Ways and Means Committee Chair Richard E. Neal, D-Mass., said.

But others weren’t optimistic that a floor vote could happen this year, with Rep. Daniel T. Kildee, D-Mich., telling reporters that predicting what will happen on the floor this year is tough.

Both Kildee and Rep. Bill Pascrell Jr., D-N.J., said the bill is expected to be introduced next week.

There was general agreement among Democrats that states affected by the $10,000 cap put in place by the Tax Cuts and Jobs Act need relief. “We stressed to all Democrats on Ways and Means how important it is,” Rep. Jimmy Panetta, D-Calif., said. Many Democrats living in states affected by the cap want to show their constituents that they’re trying to find a solution, Rep. Donald S. Beyer Jr., D-Va., said.

The $10,000 cap has had far-reaching effects, especially on blue states. According to the Urban-Brookings Tax Policy Center, 19 out of the top 20 districts affected by the cap are held by Democrats. Democrats already held a hearing on the issue.

Rep. Brendan F. Boyle, D-Pa., called repealing the SALT cap a “top four of five” priority. Boyle added that it was a misconception that it only affects states like California and New York. “It affects my district in Philadelphia,” he said. Since the $10,000 cap wasn’t indexed for inflation, it is expected to affect more than half the country soon, Boyle said.

But uncertainty remains over how the bill will address the SALT cap. Pascrell has previously stated the bill would repeal the cap for three years, paid for by reinstating the 39.6 percent top individual income tax rate. But after the meeting, he said the plan is to simply raise the cap to $15,000 or $20,000 and eliminate the marriage penalty.

Other lawmakers steered away from giving details about the bill’s contents. An individual with knowledge of the discussions told Tax Notes that a temporary repeal is what has primarily been discussed.

But any plan to meddle with the SALT cap will be met with resistance by Republicans. Ways and Means ranking member Kevin Brady, R-Texas, told reporters that the rich would benefit most if the cap is lifted or eliminated, and it would only encourage high-tax states to further increase taxes on middle-income families and workers.

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