Rep. Tom Suozzi, a New York Democrat, speaks during a press conference announcing the local state and tax committee (SALT) outside the U.S. Capitol in Washington, DC, on Thursday, April 15, 2021.
Sarah Silbiger | Bloomberg | Getty Images
House Democrats have said they will pursue a “significant” change to the $ 10,000 limit on the federal state and local tax deduction, known as SALT.
The controversial measure is part of the fiscal review of former President Donald Trump’s signature in 2017 and has been a point of pain for Americans in states with a high tax.
Under the Tax and Jobs Reduction Act, those detailing the deductions can no longer amortize more than $ 10,000 for property and state income taxes on their federal return.
Although the Forms and Means Committee did not address SALT in its package of tax proposals, President Richard Neal, D-MA, along with representatives Bill Pascrell, Jr., D-NJ and Tom Suozzi, D-NY , issued a joint statement saying it “works daily” on reform.
“We are committed to enacting a law that includes significant SALT relief that is so essential to our middle-class communities and we work daily to achieve that goal,” they said.
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As lawmakers debate President Joe Biden’s agenda, repealing the SALT deduction limit has been a turning point among lawmakers in states with high taxes.
A group of moderate Democrats, mostly from New Jersey and New York, have said they will not support a bill unless it restores the tax credit.
“I’ve been constant for six months:‘ No JUMP, no agreement, ’” Suozzi said in a separate statement.
While Democrats do not need Republican support to pass their $ 3.5 trillion spending bill, they must receive votes from all Democratic senators and almost every member of the House.
However, the revocation proposal has received a boost from lawmakers who argue that tax cuts can primarily benefit the rich.
According to a report by the Center for Fiscal Policy, 20% of taxpayers can receive more than 96% of the benefit of a SALT limit waiver, and only 9% of American households can be affected.
In addition, the top 1% of households can receive 54% of the benefit, with an average tax credit of $ 34,000.
The SALT deduction limit reported $ 77.4 billion in the first year it was set up, according to the Joint Committee on Taxation. Removing the cap for 2021 could cost $ 88.7 billion and more in the coming years.
Meanwhile, a growing number of states are now offering alternative solutions to the SALT limit for business owners passing through the market. These strategies may allow some businesses to exceed the deduction limit by using a state tax to pay some of the homeowner’s income taxes.