Some Democrats threaten to sink Construct Again Higher with out SALT reform
Rep. Tom Suozzi, DN.Y., speaks during a news conference announcing the State and Local Taxation Caucus (SALT) outside the U.S. Capitol April 15, 2021.
Sarah Silbiger | Bloomberg | Getty Images
Some House Democrats have threatened to block Build Back Better legislation if the broken-up package drops relief for the $10,000 limit on the federal withholding for state and local taxes, known as the SALT.
The $1.75 trillion social and climate spending plan hit a roadblock in December when moderate Sen. Joe Manchin, DW.Va., said he would not vote for it. The bill requires the support of all Democratic senators as part of the budget voting process.
However, President Joe Biden said this week Democrats will likely need to break down the legislation and try to pass parts of the bill, and expressed optimism for climate policy and early childhood education.
“I’m confident that we can sign off parts, large parts, of the Build Back Better Act,” he said at a news conference on Wednesday.
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But the president’s agenda could face another hurdle if legislation doesn’t include changes to the $10,000 SALT cap, a major issue for some lawmakers in high-tax states like California, New Jersey and New York.
The issue has been a pain point since it was enacted as part of former President Donald Trump’s 2017 tax overhaul, as claimants who list deductions on their federal return cannot write off more than $10,000 in state and local taxes.
Without Senate Republican support, SALT facilitation is unlikely to make it through Congress as a standalone bill.
“SALT remains a top priority,” Reps said. Tom Suozzi, DN.Y.; Josh Gottheimer, DNJ; and Mikie Sherrill, DN.J., in a joint statement.
“We support the President’s agenda and if there is any effort that involves changing tax legislation, then a SALT fix has to be part of it. No SALT, no deal,” they said.
House Democrats passed a spending package in November that raised the SALT cap to $80,000 from 2021 to 2030, before lowering it back to $10,000 in 2031.
However, it was a controversial provision, with opponents saying it was primarily a write-off for wealthy Americans. According to the Tax Policy Center, more than 90% of the benefit can go to the top 20% of earners.
“The current House version of SALT gives millionaires thousands in cash while people making less than about $100,000 a year get less than $20 on average,” tweeted D-Maine Rep. Jared Golden, who opposed the bill had voted.
However, since Democrats have limited control of the House of Representatives, they may need votes from SALT supporters. But without a deal, there may not be any changes until the regulations expire in 2026.
“I think [the House proposal] is being scaled back,” Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, told CNBC.