Pelosi ‘Sympathetic’ to Move to Lift SALT Cap in Biden Bill

House Speaker Nancy Pelosi signaled support for a move to put a repeal of the $10,000 cap on state and local tax deductions in the infrastructure and social-spending program that Democrats are hoping to pass as soon as this summer.

“Hopefully we can get it into the bill. I never give up hope for something like that,” Pelosi said at a news conference on Thursday.

She called the deduction limit enacted by President Donald Trump “devastating” to taxpayers in her home state of California, and said she is sympathetic to the move by a group of lawmakers to remove the cap in any tax legislation that is part of President Joe Biden’s long-term economic plan.

Pelosi ‘Sympathetic’ to Move to Lift SALT Cap in Biden Bill

While individual tax measures are anticipated in Biden’s forthcoming “American Families Plan” -- to help fund social-spending proposals -- the the administration has been cool to the idea of including a SALT-limit repeal, which would add to the deficit.

“If Democrats want to propose a way to eliminate SALT -- which is not a revenue raiser, as you know, it would cost more money -- and they want to propose a way to pay for it, and they want to put that forward, we’re happy to hear their ideas,” White House Press Secretary Jen Psaki said at a briefing on Thursday.

Lawmakers’ Threat

The $10,000 limitation on state and local tax, or SALT, deductions is a prime focus for several Democrats in Congress, including New Jersey Representatives Bill Pascrell, Josh Gottheimer, Mikie Sherrill, Tom Malinowski and New York Representative Tom Suozzi. The lawmakers say they won’t back any other tax-code changes to fund an infrastructure bill unless it addresses the SALT cap and have enough members to block the legislation if Republicans stay united against it.

SALT is “very important to my constituents and therefore to me,” Malinowski said in an interview Thursday. “I think the administration understands that. There are other members who feel this way.”

The representatives, along with two other New Jersey congressmen, Albio Sires and Frank Pallone, as well as Dean Phillips of Minnesota, wrote in a letter to Treasury Secretary Janet Yellen that “we could not vote for a bill that has a meaningful tax impact on our constituents unless it restores SALT deduction relief to our middle-class families.”

Other key Democrats, including Senate Majority Leader Chuck Schumer, have also voiced support for addressing the SALT cap. Yellen said at a hearing in March that “there are lots of options that have been presented, and I would work with you to try to ensure the inequities that this caused are remedied in a fair and responsible way,” without committing to a specific SALT modification proposal.

“I cheer the exuberance on the subject of the SALT tax,” said Pelosi, who called the cap “mean-spirited” and “politically targeted” to begin with. “I’m sympathetic to their position,” she added, while holding off on making a call on how to vote until the overall legislation is set.

Contentious Move

Biden released an outline for a $2.25 trillion infrastructure-focused proposal this week that would be paid for by corporate tax increases. He is set to release a second plan later this month focusing on social programs paid for by tax increases on individuals.

Final decisions on the Biden’s next proposal, due this month, are still being made and any speculation about SALT is premature, said a person familiar with the discussions who was granted anonymity to speak about them.

The lawmakers pushing for a repeal of the $10,000 SALT limit say it has hurt residents of districts with high costs of living and high state and local levies -- by removing a substantial deduction on their federal taxes.

But removing the cap could become a key area of contention as Democrats seek to raise levies on corporations and the wealthy to pay for a bevy of infrastructure, health care and social programs. In addition to costing $88.7 billion a year -- revenue that some Democrats would like to direct elsewhere -- doing away with the SALT cap is a politically difficult issue for some members of Congress, because more than half the benefits flow to households earning more than $1 million a year, according to the Joint Committee on Taxation.

Republicans have opposed Democrats’ attempts to repeal the cap, saying that it would amount to a large tax cut for the rich. GOP lawmakers also say it’s a subsidy for high-tax states that should instead cut their state levies if residents are overburdened with taxes.

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