Representative Tom Suozzi, DNY, speaks during a news conference announcing the state and local tax (SALT) rally outside the US Capitol on April 15, 2021.
Sarah Selbiger | Bloomberg | Getty Images
President Joe Biden released a framework for his $1.75 trillion spending package on Thursday. And although it hasn’t proposed changes to the $10,000 cap on the federal deduction for state and local taxes, known as SALT, some lawmakers are still pushing for the last-minute addition.
said Howard Glickman, senior fellow at the Brookings Center for Urban Tax Policy.
Another advocate, Representative Josh Gottheimer, expressed a similar level of optimism about the changes.
“I think, based on every conversation I’ve had with the leadership, my colleagues in the Senate and the White House, that SALT will be in the bill,” he said. They know they don’t have the votes without it.”
What is still possible
“Obviously, they’re not going to permanently cancel Salt’s cap,” Gilkman said. “It’s way too expensive.”
The maximum deduction brought in $77.4 billion during its first year, according to the Joint Committee on Taxes, and a complete repeal for 2021 could cost up to $88.7 billion, and more in coming years.
However, Democrats need the support of nearly every member of the House of Representatives and every Democratic senator to pass their spending plan.
“They have to find some way to please the handful of blue-state Democrats who have made this issue the number one really,” Gilkman said, referring to members of the so-called Salt Caucus, who say the limit is hurting middle-class families.
One proposal, for example, would remove the caps for 2022 and 2023 and bring them back for 2026 and 2027, after sunsets were due to take place under the Tax Cuts and Jobs Act.
However, future changes and projected revenue may depend on who controls Congress, said Steve Wamhoff, director of federal tax policy at the Institute for Tax and Economic Policy.
Another option, raising the cap for households below a certain income threshold, might also be possible, Gilkman said, explaining that the provision could still be modified “in an infinite number of ways.”
However, opponents say the changes may primarily help wealthier families, with more than 96% of benefits flowing to the top 20% of earners, according to the Tax Policy Center.
“The problem Democrats have with eliminating the SALT maximum deduction is that it looks awful,” Gilkman said, particularly as lawmakers scale back paid family leave plans and other programs for low-income families.