Senate Democrats to Force Vote to Reduce SALT Cap Sting

(Bloomberg) -- Senate Democrats plan to force a vote on reviving programs in states like New York and New Jersey designed to help residents circumvent the $10,000 limit on deductions for state and local taxes.

Lawmakers from New York, New Jersey and California, who have been seeking to repeal the deduction cap on state and local taxes, or SALT, since it was included in the 2017 Republican tax law, are pressing for the vote. It’s unlikely to succeed in the Republican-majority Senate.

Senate Democrats to Force Vote to Reduce SALT Cap Sting

Democrats are calling for the removal of Treasury Department regulations that prohibit workarounds allowing residents to create charitable funds for a variety of programs where donors can get a state tax credit in exchange, effectively removing the SALT limitation.

The Treasury rules also curb donations to some similarly structured charitable funds for private school tuition vouchers in Republican-led states such as Alabama and Georgia. Treasury said when it issued the regulations in June that such programs allowed taxpayers to claim too many tax breaks in exchange for the donations.

Senate Minority Leader Chuck Schumer is attempting to use that as an argument for Republican support.

The 2017 tax law capped SALT deductions, which were previously unlimited, at $10,0000. Democrats in Congress and state lawmakers say the change was intended to target Democratic-led states that tend to have higher taxes.

Schumer, of New York, is planning to force the vote in the coming weeks, after the Senate returns from a two-week recess. He is also planning to use the same tactic to try to roll back regulations backed by President Donald Trump that weaken carbon pollution limits at power plants.

House Democrats are writing legislation that would reverse the SALT cap, and they plan to bring it to a vote by the end of the year. That legislation would also stand little chance of passing the Senate as long as Republicans are in control.

“This issue generates a level of passion that is almost unrivaled by anything else,” said Rohit Kumar, a former aide to Senate Majority Leader Mitch McConnell. “There is political value in being seen as fighting for something even though they know in their heart of hearts that it won’t happen.”

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