Blue-state Democrats demand SALT relief in Biden's next big bill

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A group of blue-state Democrats is pushing for its top tax priority as part of President Joe Biden’s next major legislative package — a possible voting bloc that could make or break the bill if they stay united on the House floor.

The House Democrats stepping forward want to see a Biden infrastructure package that repeals the Trump-era limit on state and local tax deductions, known as the SALT deduction. The repeal is popular among blue-state members of their party but carries a significant budgetary cost, making it one of the emerging fault lines in Democrats’ coming infrastructure talks.

“I think that if it doesn’t happen now, it’s not going to happen,” said Rep. Tom Suozzi (D-N.Y.), who this week became the first Democrat to vow he’d oppose any future tax increases without a restoration of the SALT deduction. “There’s certainly a lot of support" among House Democrats for reviving the full SALT deduction, he added. "The question is, who’s willing to draw a line in the sand on this issue?”

Four House Democrats — Suozzi and Reps. Mikie Sherrill, Josh Gottheimer and Bill Pascrell of New Jersey — have gone public so far with their insistence on SALT reinstatement in the upcoming package. Privately, though, several more lawmakers are in conversations about the effort and plan to formally join in the coming days, according to multiple members and aides. And right now, Speaker Nancy Pelosi and her leadership team can only afford to lose three Democratic votes as she prepares to shepherd a Biden infrastructure package that, despite the bipartisan potential of the issue, might not attract any GOP support.

Sherrill struck a positive note about the group’s prospects of prevailing, even as she characterized the SALT deduction as a must-have in any infrastructure deal that’s paid for by rolling back parts of the 2017 GOP tax cuts.

“Any changes to the disastrous 2017 Republican tax bill need to address the SALT deduction cap," Sherrill said in a statement. "I’ve been working to get rid of the SALT cap since my first day in office and I’m confident that we’ll be able to find common ground with the Biden administration."

Biden had plenty of warning that some Democratic lawmakers would dig in on reversing Trump’s changes to the SALT deduction. 11 Democrats on the Ways and Means Committee sent a letter to the president late last month that called for the deduction’s addition to the upcoming infrastructure package. The 11 said they chose not to raise the issue earlier to avoid interfering with Biden’s Covid aid bill but that now it’s time to act on a “critically important tax priority.”

“We were willing to briefly postpone discussions of this subject,” the group wrote in the previously unreported letter, which was obtained by POLITICO. “Given the gravity of this issue for our constituents, however, we must ask to open a dialogue with you immediately about including SALT relief in the upcoming infrastructure package.”

The push to revisit SALT — which comes as Biden unveils his multi-trillion-dollar infrastructure proposal on Wednesday — comes with a hefty price tag: $88.7 billion for 2021 alone, and far more for a permanent repeal of the cap that former President Donald Trump and Republicans imposed four years ago. Some liberal groups have argued against repealing or modifying the deduction, noting that a return to unlimited SALT write-off would mostly benefit wealthier families.

But the rank-and-file Democrats speaking out this week aren’t alone in calling for a return to the past SALT deduction. The GOP cap, imposed as part of a tax bill that passed with zero Democratic votes, sparked vocal complaints from blue-state Democrats of all ideological persuasions, particularly in areas with the highest property values. Restoring the SALT deduction has won support in the past from moderate frontliners such as Rep. Tom Malinowski in New Jersey as well as senior progressives like Reps. Rosa DeLauro of Connecticut and Jackie Speier of California.

It’s too early to know how many House Democrats would be willing to oppose a future infrastructure package over the tax issue, which would put themselves at odds with their own president. Still, the four who’ve made their positions known amount to a notable coalition of Democrats willing to lay down an early marker for Biden’s next major agenda item after nearly every member of the party fell in line behind the president’s $1.9 trillion coronavirus response bill.

The demand to expand the state and local tax benefit further illustrates the tightrope that Democrats must walk as they craft their next package — which is likely to pay for new roads, bridges and other jobs programs using a complex set of tax increases and other revenue-raisers — while trying to hold the party together on the floor.

Senate Majority Leader Chuck Schumer himself has been forceful in his calls to restore the unlimited SALT deduction and once said eliminating it would be “one of the first things I will do” if elected to his current leadership post. But Schumer hasn’t indicated how he’ll handle the issue in the infrastructure package.

“When it comes to taxes that affect families, my line in the sand is SALT,” Gottheimer said in an interview. “And I think others share that view.”

House Democrats have tried to reverse the GOP’s limit on the deduction several times since retaking the majority. The House passed a standalone bill to temporarily repeal the cap in late 2019 and again as part of the massive Democratic coronavirus relief bill in the spring of 2020. Both attempts were rebuffed by the GOP-controlled Senate, though some of their own members were in favor of the change.

Despite the pushback from liberals who view the deduction as predominantly helpful to wealthier taxpayers, Democrats from higher-tax states argue that it is also a middle-class issue. Some of Congress’s most prominent progressives have previously backed repeal of the SALT cap, including Rep. Katie Porter of California and Rashida Tlaib of Michigan.

“There are some members who feel very strongly about it,” Congressional Progressive Caucus Chair Rep. Pramila Jayapal (D-Wash.) told reporters Tuesday when asked about the issue. Nonetheless, she added, “I’m not sure that our members will see it as one of the fundamental reforms for the tax system that would make the system more fair.”

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