A new caucus pressing for repeal of the $10,000 limitation on state and local tax deductions boasts the support of more than one-third of Democrats on the House Ways and Means Committee, which will be ground zero for critical revenue portions of the upcoming infrastructure package.
While only a few Democrats so far are threatening to withhold support for the $2 trillion-plus measure, one of President Joe Biden’s top priorities, such demands for “SALT” relief can’t be ignored as the measure begins winding its way through the legislative process.
After a Thursday news conference announcing the new caucus, Rep. Tom Suozzi, a New York Democrat and co-chair of the group, pointed out that eight of the 25 Democratic members of the tax-writing panel attended the kickoff. Another caucus member, Rep. John B. Larson, D-Conn., couldn’t make it, Suozzi said.
“Did you see Mike Thompson was here?” Suozzi said, referring to the California Democrat who chairs the Ways and Means Select Revenue Measures Subcommittee.
Alex Macfarlane, a spokeswoman for Thompson, said he was at the caucus’s launch to show support. Thompson typically doesn’t join caucuses or co-sponsor legislation on topics that are before his subcommittee.
Suozzi added that three of the Ways and Means panel’s six subcommittee chairs attended the event. The support of Larson, who is chairman of the Social Security Subcommittee, raises that to four, he said. The subcommittee chairs at the news conference were Reps. Danny K. Davis, D-Ill., chairman of the Worker and Family Support Subcommittee; Bill Pascrell Jr., D-N.J., who is chairman of the Oversight Subcommittee; and Thompson.
‘We don’t want to pay twice’
Davis, whose 7th District includes downtown Chicago, said SALT deductibility prevents double taxation of his and his colleagues’ constituents, which they enjoyed for over a century before the 2017 law took effect.
“We don’t mind having the big shoulders, but we don’t want to pay twice,” Davis said, referring to Chicago’s moniker “The City of Big Shoulders.”
While Ways and Means Chairman Richard E. Neal was not at the caucus launch, the Massachusetts Democrat has been a vocal supporter of repealing the $10,000 limit. He pushed for its inclusion in coronavirus relief legislation last year and voted for a House bill in December 2019 that would have repealed the SALT cap for two years.
So even if repealing the SALT cap isn’t in Biden’s proposals, it’s starting to look like the administration and Democratic leaders may need to cut some kind of deal with the cap’s opponents.
The aim of the caucus is to raise awareness and support for repeal of the limitation, said Suozzi, whose SALT repeal bill has 106 co-sponsors, including 10 Republicans. Half of the co-sponsors are from highly taxed and populous California and New York, while another 12 are from New Jersey and sizable contingents hail from Illinois, Massachusetts, Connecticut and Maryland.
Three members of the SALT Caucus — Suozzi, Pascrell and Rep. Josh Gottheimer, D-N.J. — have all made what they call the “No SALT, no deal” pledge; Suozzi and Pascrell are on Ways and Means. Pascrell denied that amounted to a threat that these three would vote against an upcoming infrastructure bill in a House narrowly controlled by Democrats.
“Look, no one’s set out to derail anything,” he said, calling the various efforts “a beginning” in a monthslong negotiation on the infrastructure bill.
There are alternatives to full repeal of the cap, which Rep. Alexandria Ocasio-Cortez, D-N.Y., said would be a “gift to billionaires.” She didn’t sign an April 13 New York delegation letter to Democratic leaders stating that “we will not hesitate to oppose any tax legislation that does not fully restore the SALT deduction.”
In 2019, the Joint Committee on Taxation estimated that repealing the SALT cap would amount to a $77.4 billion tax break for that calendar year. The committee estimated that 52 percent of that would go to taxpayers with annual incomes of $1 million or more, 71 percent to those with incomes of $500,000 or more and 94 percent to those with incomes of $200,000 or more.
Ocasio-Cortez said there was “a conversation to be had” about raising the $10,000 limit, which she said hits families in the New York City area and elsewhere as the result of a conscious GOP effort in the 2017 tax law to hurt “blue states and coastal states.” But she disagreed with her home-state colleagues who signed the letter.
“I don’t think that we should be holding the infrastructure package hostage for a 100 percent full repeal on SALT,” Ocasio-Cortez said. “Personally, I can’t stress how much that I believe that is a giveaway to the rich.”
‘Harmful to teachers and cops’
Backers argue that the tax increase hits middle-class taxpayers since families can earn much more in their states and still be in the middle class than is the case in other states.
“I think there’s some misconception out there that this won’t help middle-class families,” said Rep. Mikie Sherrill, D. N.J., a vice chair of the new caucus. “Over half of our constituents in my district took this deduction before the 2017 tax plan. So this has really been harmful to teachers and cops throughout my district.”
Changing the SALT limitation is not about “helping billionaires and millionaires, it’s about helping the middle class,” said Rep. Andrew Garbarino, R-N.Y., who replaced now-retired GOP Rep. Peter T. King.
“The average real property tax bill on my block on Long Island is $15,000 a year,” Garbarino said. “I don’t live in a big house. … Across the street from me lives a teacher; to the left of me lives a police officer. They all have high tax bills, but they don’t make a lot of money.”
While Republicans are unlikely to back infrastructure legislation if it’s written without their input, inclusion of SALT relief could put some of those swing district Republicans in a bind — not to mention that GOP leaders have been highlighting the repeal efforts as a Democratic sop to the rich.