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SALT Cap Repeal on the table

(Andrew Harnick; Abaca Press / TNS)

Representative Josh Gottheimer said a repeal of the $10,000 cap on state and local tax, or SALT, deductions could be offset by cracking down on tax cheats, the first proposal from Democrats as a way to pay for revival of a valuable tax break, Bloomberg reported. The New Jersey Democrat said Monday that increasing funding for the Internal Revenue Service to boost enforcement efforts could yield enough money to pay for reinstating the full SALT deduction as well as a portion of President Joe Biden’s $2.25 trillion infrastructure package.

By the Numbers: Restoring the full deduction would cost the government $88.7 billion in revenue for 2021 alone, according to the non-partisan Joint Committee on Taxation.

Be Smart: Just last week, seventeen New York Democrats told House Speaker Nancy Pelosi that any further economic recovery bills must fully restore the SALT deduction to get their support. The signatories add to the list of Democrats who are threatening to block President Biden’s $2.25 billion infrastructure bill funded by corporate tax increases if the legislation also didn’t restore a tax break valuable for many residents in high-tax states, including New York, New Jersey, and California. There are enough Democrats who have expressed support for re-instituting the full deduction that they could block Biden’s proposal, unless Pelosi can broker a deal.

White House Responds: White House Press Secretary Jen Psaki has said the administration is hesitant to back repealing the $10,000 cap on SALT deductions because it would cost money that could be spend on other priorities, Bloomberg noted. Psaki said that lawmakers should come up with proposals to pay for the more generous deduction if they want to it to be a part of the bill. [Bloomberg]

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