Pelosi has opened door to lift SALT Tax Cap in $2.25T Spending Bill of Biden

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US House Speaker Nancy Pelosi has shown her support for including a repeal of the $10,000 cap on state and local deductions in President Biden’s sweeping spending proposal. She issued a press conference and said, “Hopefully we can get it into the bill. I never give up hope for something like that”. Several Democrats from New York and New Jersey threatened to withdraw support for the $2.25 trillion infrastructure measure and dubbed the American Jobs Plan unless the Trump-era deduction limit is lifted. Pelosi said the deduction cap was imposed by Republicans with the passage of the 2017 tax overhaul and called it devastating to taxpayers in her home state of California. She said that she is sympathetic to rank-and-file members’ push to roll back the deduction limit.

But, the hard-line from the group of moderate Democrats could put the bill’s passage at risk, unless 10 Republicans break with Senate Minority Leader Mitch McConnell. Democrats will almost certainly have to pass the measure via budget reconciliation, the obscure Senate rule the party used last month to approve Biden’s $1.9 trillion American Rescue Plan without a single GOP vote. They can stand to lose no members in the Senate and just 3 in the House if Democrats decide to pass the measure on a party-line vote via reconciliation, assuming all GOP legislators are aligned against the bill. The elimination of the SALT deduction cap would require Democrats to vote for a policy that disproportionately benefits wealthy Americans living in blue states.

The Joint Committee on Taxation said that Households earning at least seven figures a year would receive the majority of the benefits. The White House administration has said it welcomes feedback from legislators on how best to address infrastructure, which is broadly viewed as a bipartisan issue in Washington but has remained cool to the idea of the SALT tax repeal. The White House press secretary, Jen Psaki also said, “If Democrats want to propose a way to eliminate SALT, which is not a revenue raiser, as you know, it would cost more money, and they want to propose a way to pay for it, and they want to put that forward, we’re happy to hear their ideas”.