© Bloomberg. The U.S. Capitol in Washington, D.C. Photographer: Stefani Reynolds/Bloomberg
(Bloomberg) — House Democrats are getting more creative in their ideas to squeeze the state and local tax deduction into President Joe Biden’s economic agenda as lawmakers face increasing pressure to cut billions of dollars from a social-spending bill.
Under current law, the SALT deduction’s $10,000 limit — enacted in 2017 to help pay for Republican tax cuts — is scheduled to be in place through the end of 2025, reverting to a full tax break in 2026.
Democrats had recently been contemplating suspending the $10,000 limit for two years, then reinstating the limit in 2024 and returning to a full deduction in 2026. The new idea under consideration is to instead reinstate the limit from 2024 to 2027, and return to a full deduction in 2028.
“We’re thinking about it. I can tell you that,” House Ways and Means Chairman Richard Neal told reporters late Monday.
Read QuickTake: All About SALT, the Tax Deduction That Divides U.S.
This would make the spending bill appear less costly because congressional scorekeepers would assume that the cap is in effect from 2024 to 2027. Democrats, however, plan to repeal the cap entirely before it’s reinstated — though there is no guarantee they’ll be able to do that.
SALT has emerged as one of the key issues for a contingent of House Democrats, largely representing high-tax areas in New York, New Jersey and California. They have said that SALT, which was restricted in the 2017 Republican tax law, must be included in the Biden agenda to win their votes.
However, key lawmakers who have been advocating for the issue have yet to endorse the two-year delay idea.
“No SALT, no deal. I’m confident we are going to get something done,” Representative Tom Suozzi of New York said Tuesday, though he declined to comment on the two-year delay option.
A two-year outright repeal, which would cost roughly $180 billion, is getting less likely as Democrats make major cuts to trim a $3.5 trillion social spending package to nearly $2 trillion. Some lawmakers, including Representative Brendan Boyle of Pennsylvania, said he prefers lifting the cap to about $20,000 or $25,000 and giving married taxpayers a higher cap than single filers.
Representative Bill Pascrell, who met with Biden Monday in his home state of New Jersey, said he got to discuss several issues with the president. Pascrell said labor leaders present raised SALT as an important issue for people in high-tax areas.
“That fight is by no means over,” Pascrell said. “It’s an everyday subject and we continue to pursue it.”
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SALT-Cap Proposal Is Floated for Two Years Off and Four Years On
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