Democrats released the first look at proposed tax changes for their multitrillion-dollar spending plan, and glaringly absent were changes to the SALT cap.
A vocal contingent of congressional Democrats in high-tax states have pressed for the proposed $3.5 trillion package to raise the cap on federal tax deductions for paid state and local taxes, a move that would result in tax cuts for the wealthy.
While changes to the cap were not included in Monday’s revenue-raising blueprints, those pushing for the cap to be raised or repealed are indicating that it is not the end of the push. Those on the so-called “SALT caucus” will continue pressuring House leadership to include the cuts for their constituents.
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In a joint statement after the tax plan’s release, Ways and Means Committee Chairman Richard Neal of Massachusetts, Rep. Bill Pascrell Jr. of New Jersey, and Rep. Tom Suozzi of New York addressed SALT’s absence from the current list of proposals. They noted that the legislation is being “crafted continuously.”
“So what we consider now is an important step in the process, but not the final step. With Speaker Pelosi, we continue to work among our colleagues and the Senate to undo the short-sighted capping of SALT by Republicans,” the Democrats said. “We are committed to enacting a law that will include meaningful SALT relief that is so essential to our middle-class communities, and we are working daily toward that goal.”
Additionally, Suozzi, who has consistently parroted the refrain of “no SALT, no deal,” told reporters on Monday that he thinks changes to the law will end up in the spending package, which is set to be rammed through Congress using a budgetary process known as reconciliation.
“I am confident that a SALT fix will be part of the final package,” Suozzi, who has been nicknamed “Mr. SALT” for his fervent efforts over the past six or so months.
Despite criticism about lowering or cutting the cap, Democrats from high-tax states such as New York have been trying to use the party’s scant majority in the House as leverage to shake up SALT. They contend that it hurts the middle class and could force the wealthy to sell their homes and move to lower-tax states because of the high taxes.
Analyses found that repealing the cap would disproportionately benefit the wealthy. The Tax Policy Center found that only 3% of middle-income households would pay less in taxes if the SALT cap is nixed. The Tax Foundation predicts that a full repeal of the cap could reduce federal revenue by $380 billion through 2025.
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Among the policy proposals that were on Democrats’ tax menu were plans to raise the top marginal income tax rate from 37% to 39.6%, increase the capital gains rate for high earners from 20% to 25%, and raise the corporate tax rate to 26.5% from 21%.
Because of the slim majority that Democrats have in Congress, they cannot afford to lose a single vote in the Senate and can only handle the loss of a few votes in the House, making negotiation on the massive spending package tricky.
