Democratic leadership outlined plans Monday to bypass GOP filibusters to alter the cap on deductions for state and local taxes paid, a tax break largely for the wealthy opposed by most Republicans and some Democrats.
The fiscal 2022 Senate Democratic budget proposal released on Monday calls for “SALT cap relief” among its sweeping measures. While the budget is not legislation and is not binding, approving it would unlock a legislative process that would allow for Democrats to enact legislation with a simple majority in the Senate, meaning that Republicans could not block it using the filibuster.
The proposal comes after vocal advocates in the self-described “SALT caucus” pushed for changes to the tax code. A $10,000 cap on the SALT deduction, which largely benefits high-income households, was imposed by Republicans as part of the 2017 Tax Cuts and Jobs Act, which was signed by then-President Donald Trump.
Members of the SALT caucus, which include both Republicans and Democrats, hail from high-tax states and argue that the cap doesn’t just affect wealthy people because of the cost of living in their districts, although the Tax Policy Center found that only 3% of middle-income households would pay less in taxes if the cap is removed.
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“This group is going to work together to educate people about how the middle class in my district or in many of the districts here is very different from the middle class in other districts in the country,” said Rep. Tom Suozzi, a New York Democrat and co-chairman of the SALT caucus, in April.
Raising the SALT deduction cap has faced opposition among some lawmakers. GOP Sen. Pat Toomey of Pennsylvania and other lawmakers have argued that the change would force low- and middle-income people to subsidize wealthy individuals in high-tax states and municipalities.
Meanwhile, socialist Rep. Alexandria Ocasio-Cortez said that removing the cap would be a “gift to billionaires.” She was not among the vast majority of House Democrats from New York who have been lobbying to remove the GOP-imposed ceiling.
“There’s a conversation to be had, I think, about the cap itself and at what level it is appropriate and where we can help families that are really deeply impacted,” she said earlier this year. “We can have a conversation on the policy, but it’s a bit of an extreme position, to be frank.”
Democrats last tried to repeal the cap in 2019, when they held a hearty 34-member majority in the House. Sixteen Democratic lawmakers joined Republicans in voting against it, and it passed 218-206, although it languished in the Republican-held Senate. The 34-vote majority Democrats once had has shrunk to just eight.
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It is unclear from the directive in the budget as to what exactly the “relief” for the SALT cap would be, although the Tax Foundation, a nonpartisan think tank that generally prefers lower taxes, estimates that repealing the deduction would cost the United States $380 billion in revenue.
While it might not be completely repealed, the cap could also be raised as part of negotiations to pass the spending package. The provision is already set to sunset in 2025.
