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House prepares for reconciliation vote without SALT relief

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Rep. Tom Suozzi, D-N.Y., speaks during a news conference announcing the State and Local Taxes (SALT) Caucus outside the U.S. Capitol on April 15, 2021.

Sarah Silbiger | Bloomberg | Getty Images

After fighting to repeal the $10,000 limit on the federal deduction for state and native taxes, generally known as SALT, a gaggle of House Democrats say they are going to still vote for the party’s spending package without SALT reform.

Reps. Josh Gottheimer, D-N.J.; Mikie Sherrill, D-N.J.; and Tom Suozzi, D-N.Y., members of the SALT Caucus who’ve vowed to oppose a bill without SALT relief, expressed support for the Inflation Reduction Act after it passed within the Senate.

Enacted through the Republicans’ 2017 tax overhaul, the SALT cap has been a pain point for costly states like Latest York and Latest Jersey because residents cannot deduct greater than $10,000 in state and native taxes on their federal returns.

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With a slim Democratic majority, SALT reform was a sticking point during Construct Back Higher negotiations, and the House passed an $80,000 SALT cap increase through 2030 in its spending package. Nonetheless, the plan stalled within the Senate after pushback from Sen. Joe Manchin, D-W.Va.

‘No SALT, no deal’ doesn’t apply, Suozzi says

Nonetheless, SALT advocates have shifted since Senate Majority Leader Chuck Schumer, D-N.Y., and Manchin announced a late July deal on a reconciliation bill covering climate, health care and taxes.

“This laws doesn’t raise taxes on families in my District — it reduces the financial burden on them,” Gottheimer said in a press release. “For that reason, and for its strong support of the climate, lower prescription drug prices and job creation, I will be voting for it.”

But “if someone tries to vary the tax rates on families in my district, I’ll insist that we restore the state and native tax deduction,” he added.

Sherrill and Suozzi shared similar positions, including their plans to vote for the bill.

“Regarding SALT, the Inflation Reduction Act doesn’t increase personal income taxes, and ‘No SALT, no deal’ doesn’t apply,” Suozzi said in a tweet.

Recently, there have been other attempts to fight for SALT relief. The three lawmakers, together with Reps. Tom Malinowski, D-N.J.; and Katie Porter, D-Calif.; in May sent a letter to leaders of the House Appropriations subcommittee, asking to disclaim the IRS funds to dam state-level SALT cap workarounds.

And the push for SALT reform faced a setback in April when the Supreme Court rejected a challenge to overturn the laws.

Some argue SALT relief mostly helps the rich

While advocates say the SALT deduction limit hurts middle-class families, opponents contend removing the cap may primarily profit wealthy homeowners.   

If repealed completely, the highest 20% of taxpayers might even see greater than 96% of the relief, in keeping with a Tax Policy Center report, affecting only 9% of American households. 

Without an extension from Congress, the $10,000 SALT limit will sunset by 2026 together with other provisions from the Tax Cuts and Jobs Act of 2017. 

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