Democrats disagree on SALT changes

Democrats in the House and Senate are clashing over how to address a tax break that has a disproportionate impact on several blue states.

Democratic lawmakers in both houses want to make changes to the $ 10,000 state and local tax deduction (SALT) limit, a brainchild of the Republican Party, as part of their broad legislation on social spending and climate change, but they have chosen different Tactics: House proposes to raise cap level substantially, while key senators back exemption for taxpayers below a certain income level.

A resolution will need to be reached before Democrats get a version of the budget reconciliation package to President BidenJoe Biden Video showing violence removed from Rep. Gosar’s account after pushback Federal judge rejects Trump’s effort to block Jan.6 documents Expected price increases raise political stakes for Biden MOREdesk.

Republicans passed the SALT deduction limit of $ 10,000 as part of their 2017 tax law, as a way to help offset the cost of tax cuts elsewhere in the bill. Currently, the limit is scheduled to expire after 2025.

Politicians in high-tax states like New York, New Jersey and California have long disliked it, arguing that the cap hurts their residents as well as the states’ ability to provide services. But the cap is a sensitive issue for Democrats because analysts from across the ideological spectrum have estimated that repealing it entirely would cost hundreds of billions of dollars and greatly benefit high-income households.

Democrats waited months to publish proposals on how to address the SALT deduction in the spending package, and they only began to do so last week.

The most recent version of the House bill would increase the limit from $ 10,000 to $ 80,000, keeping it at that level until 2030. The limit would then return to $ 10,000 by 2031.

The proposal is estimated to raise about $ 14 billion over 10 years, chairman of the House Ways and Means Committee. Richard NealRichard Edmund NealThe 0.3 percent investment: able to make a difference in preventing elder abuse Democratic leaders increase pressure on rejections of Biden’s agenda JCT publishes score for LA’s social spending bill House of Representatives MORE (D-Mass.) He says. Neal described the SALT negotiations in the House as challenging and emotionally tense.

“If you moved about an inch this way, then the suspicion set in, and if you moved an inch like that, the suspicion set in,” he told reporters last week.

The House provision is backed by lawmakers who have more aggressively pushed for changes to the SALT deduction limit. Democratic representatives. Josh gottheimerJoshua (Josh) Gottheimer Biden’s Next Challenge: Selling CBO Infrastructure Bill Indicates Lawmakers Will Have To Wait For Full Score On Social Spending 12:30 Hill Report: Democrats Wait For CBO Score To the bill on social spending MÁS (New Jersey), Thomas Suozzi (New York) and Mikie sherrillRebecca (Mikie) Michelle Sherrill Senators Seek To Permanently Expand Telehealth Eligibility The Hill’s Morning Report – Presented By ExxonMobil – House Sprints For Build Back Better, Infrastructure Votes Today House Democrats Modify SALT Provision On Bill of expenses law MORE (New Jersey) said in a statement last week that the change “will put money back into the pockets of working, middle-class families in our districts and help ensure that our local communities can continue to make the investments we need.”

But Sens. Bernie sandersBernie Sanders Progressives Call for Removal of Buffalo Mayor from DNC Democrats Must Develop Voter Communication Strategies Media Narrative Rolled Back the Role of Education in Virginia Elections MORE (I-Vt.) And Bob MenendezRobert (Bob) Menéndez Spending Bill Faces Senate Struggle Republicans Express Concern Over Biden’s Candidate for Ambassador to Germany Biden Sparks High-Stakes Struggle Over Spending Framework MORE (DN.J.) said last week that they are developing a proposal that takes a different approach, keeping the limit at $ 10,000 and making it permanent, but that includes an exemption from the limit for taxpayers with income below a level between $ 400,000 and $ 550,000.

The proposals have some similarities. Both aim to allow the vast majority of households to deduct all of their state and local taxes, and both are designed not to increase the deficit.

But both House and Senate Democrats argue that their approach is the best.

Rep. Tom malinowskiThomas (Tom) Malinowski Israel Says Blacklisted NSO Group ‘Has Nothing to Do’ With Government Policies Hillicon Valley – The Race to Report Cyber ​​Violations Lawmakers Call on the Biden Administration to Take More Action Against spyware groups MORE (DN.J.), who helped develop an initial version of the House proposal with Rep. Katie Porter (D-Calif.), Raised concerns about an income-based exemption from the cap.

“Income limits are complicated in part because there are very wealthy people who don’t have a lot of income,” Malinowski told The Hill on Tuesday. “Meanwhile, in districts like mine … there are people who can earn more than $ 400,000 a year, but who would not be considered rich because of the cost of living.”

Also, Malinowski said, the House proposal is further along in its development.

“We really can’t have a conversation about alternative proposals until we see how they at least achieve income neutrality,” he said.

Sanders and Menendez, however, have argued that their proposal is the right approach to prevent wealthy people from getting a big tax break.

Sanders said at a news conference last week that while raising the limit is better than repealing it entirely, an increase in the limit “is still quite regressive.” Menendez told the same conference that about 98 percent of New Jersey property taxpayers would be exempt from the cap under the senators’ proposal.

The collaboration between Sanders and Menendez is notable because Sanders is a leading progressive and Menendez is from one of the states where the SALT deduction limit has been a major issue.

Several tax experts say the senators’ approach makes more sense than the House proposal.

“It’s a more middle-class approach and doesn’t give very high-income people a free tax cut,” said Seth Hanlon, a senior fellow at the left-leaning Center for American Progress.

Hanlon dismissed Malinowski’s concern that wealthy people with little income would abuse an income-based exemption, saying that a taxpayer in that situation can only benefit from the SALT deduction to a limited extent.

The left-leaning Institute of Economic and Tax Policy published an analysis that concluded that the House proposal would provide more benefits to households in the top 1 percent of income than the Senate. The expert group also estimated that the Senate proposal would be less expensive in the short term.

Both House and Senate Democrats said they are in contact with lawmakers in the other house to reach an agreement on the SALT issue.

Sen. Menendez continues to work with Senator Sanders to refine his income neutral proposal in a way that benefits as many middle class families as possible in high cost states like New Jersey, ”said a Menendez spokesperson. “He has been engaged with colleagues in the Senate and House to promote this important issue.”

Final agreement on changes to the SALT deduction limit may not be reached right away. House Democrats are not expected to pass their version of the social spending bill until at least next week. The Senate is then expected to make a series of changes to the bill before voting.

“I told the senators that I am open to their approach, and they told me they are open to ours,” Malinowski said. “We have a little time to figure out which approach or combination of approaches best achieves the goal.”

Some progressives have criticized including changes to the SALT deduction cap in the spending bill because of the potential benefits for high-income taxpayers. But the inclusion of a provision to lower the cap is not expected to prevent progressives from supporting the overall package, which includes spending in areas such as child care, health care and climate.

“It may be one of those things that we don’t like, but it will be there,” said the chairman of the Congressional Progressive Caucus. Pramila JayapalPramila Jayapal Readers Who Opposed Their Parties on Infrastructure Bill T House Passes Trillion Infrastructure Bills, Advances On The Money Social Spending Plan – Presented by Citi – A House Divided on a Unified Agenda MORE (D-Wash.) He told reporters last week.

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