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SALT-Cap Proposal Is Floated for Two Years Off and Four Years On -Breaking

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© Bloomberg. Washington, D.C. – The U.S. Capitol Photographer: Stefani Reynold/Bloomberg

(Bloomberg) — House Democrats are getting more creative in their ideas to squeeze the state and local tax deduction into President Joe Biden’s economic agenda as lawmakers face increasing pressure to cut billions of dollars from a social-spending bill.

Under current law, the SALT deduction’s $10,000 limit — enacted in 2017 to help pay for Republican tax cuts — is scheduled to be in place through the end of 2025, reverting to a full tax break in 2026.

Recently, Democrats were considering suspending $10,000 for two years and reinstating it in 2024. Then returning to full deductions in 2026. Instead, the new plan is to reinstate the $10,000 limit in 2024-2027 and then return to full deduction 2028.

“We’re thinking about it. I can tell you that,” House Ways and Means Chairman Richard Neal told reporters late Monday.

Check out Quick Take: SALT is the tax deduction that divides America

The spending bill would appear to be less expensive because the congressional scorekeepers assume the cap was in place from 2024-2027. Democrats, however, plan to repeal the cap entirely before it’s reinstated — though there is no guarantee they’ll be able to do that.

A contingent of House Democrats representing areas with high taxes in New York, New Jersey, and California has identified SALT as a key issue. SALT, which is restricted by the Republican tax law of 2017, must be part of the Biden agenda to get their votes.

But, the idea of a two-year delay has not been supported by key legislators who had advocated for this issue.

“No SALT, no deal. I’m confident we are going to get something done,” Representative Tom Suozzi of New York said Tuesday, though he declined to comment on the two-year delay option.

Two-year total repeal is less possible as Democrats cut major portions of a $3.5 trillion spending plan to social programs to close to $2 trillion. Rep. Brendan Boyle from Pennsylvania said that he preferred to lift the cap at $20,000 or $25,000 for married taxpayers, rather than single filers.

Biden’s New Jersey state representative Bill Pascrell said that he had the opportunity to talk with him about several topics. Pascrell indicated that the president raised the matter of SALT among labor leaders in New Jersey.

“That fight is by no means over,” Pascrell said. “It’s an everyday subject and we continue to pursue it.”

©2021 Bloomberg L.P.

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