Democratic lawmakers on Tuesday appeared to be nearing agreement on the so-called “salt” cap on state tax deductions for state and local taxes.
Donald Trump’s 2017 tax reform limited the amount that households could deduct state and local property taxes from their federal income tax to $ 10,000, which hit homeowners in states with high state and local property taxes like New York, New Jersey, and California. Critics accused the then president of unfairly punishing voters in “blue” states who voted against him in 2016.
A small group of Democrats in the House of Representatives, led by New Jersey’s Josh Gottheimer, have sought to reverse the tax changes in President Joe Biden’s “Build Back Better” plan and threatened to withhold support for the broader law that it was because, the upper limit will be lifted. But progressive critics have resisted the move, saying that it would benefit rich Americans disproportionately.
Legislators appeared to be approaching a deal on Tuesday to lift the five-year cap. Democrats on Capitol Hill are now considering a five-year suspension of the cap through 2025, applying retrospectively to include the current tax year, according to a person briefed on the negotiations.
Gottheimer issued a joint statement Tuesday with New Jersey Democrat Mikie Sherrill and New York Democrat Tom Suozzi saying the cap remains “a tough blow to our home states. . . as we work to recover from the pandemic and put our economies on solid footing and get our constituents back to work ”.
“Today’s news encourages the lifting of the Salt Cap to be included in the final reconciliation package,” they added, saying they would “continue to work with Democrats in the House and Senate on this issue.”
However, it remained unclear whether all 50 Democratic senators would agree to such a move. Bernie Sanders, the progressive Senator from Vermont, made a damning statement Tuesday night: “The last thing we should do is give the very rich more tax breaks.” Sanders said he was “open to a compromise approach” to protect the “middle class in high-tax countries” but added, “I will not support any further tax breaks for billionaires.”