Democrats hope the next coronavirus relief bill will remove the cap on state and local tax deductions (SALT). They argue that such a change would allow state and local governments to respond to the pandemic under less pressure to cut services. Although the current political reality makes it highly unlikely, this reiterates the Democrats’ intention to repeal this unpopular element of the Trump tax overhaul.
- Why it matters: If Joe Biden is elected President and the Democrats take control of the Senate, Chuck Schumer promises to make this a priority. Barring any changes, the SALT cap will remain in place until the end of 2025. Senate Majority Leader Mitch McConnell has argued that the measure “would provide massively expensive gifts to wealthy people in high-tax blue states.”
- Skepticism from the far left will make this controversial in the future: Analysis from the Tax Policy Center shows that repealing the limitation would benefit 9 out of 10 households earning the top 1% of incomes. By contrast, only 3% of middle-income earners, those making between $49,000 and $86,000 a year, would pay less in taxes if the limitation were repealed. [Newsday+CNBC]