OPINION: This article contains commentary which reflects the author’s opinion
Three House Democrats are breaking with House Speaker Nancy Pelosi and Joe Biden’s efforts to pass a massive tax hike bill to pay for their infrastructure bill.
The Tax Cuts and Jobs Act passed by a Republican Congress in 2017 put a $10,000 cap on federal deductions for state and local taxes paid.
There was previously no limit on the deductibility of those taxes.
Republicans argued that the cap was necessary to finance other tax benefits in the bill, including lower personal income tax rates and a lower corporate tax rate.
Currently, there’s disagreement among Democrats on whether it makes sense to restore the deduction because several liberal lawmakers see it as a giveaway to the wealthy.
The three House Democrats said they will vote against any tax increase if it doesn’t repeal the state and local tax deduction cap (SALT).
New Jersey Democrat Rep. Josh Gottheimer said: “We need to be careful not to do anything that’s too big or too much in the middle of a pandemic and an economic crisis. It’s got to be responsible and both parties need to be at the table. This can’t just be jammed through without input and consideration from the other side.”
New York Democrat Rep. Tom Suozzi agreed, saying he is “not going to support any change in the tax code” without a “restoration” of the SALT deduction.”
Suozzi said ending the SALT deduction was a “body blow” to “middle-class families in New York.” He said it caused people to leave the state and said if they don’t put back the deduction (Trump took it away in his tax plan) “families will continue to leave.”
Gottheimer, Suozzi, and Rep. Bill Pascrell (D-N.J.) released a joint statement Tuesday evening affirming the “No SALT, No Deal,” pledge, arguing the cap has “crushed” residents of their districts.
Democrat Rep. Scott Peters of California is more comfortable with a smaller tax hike for companies than the 28% in Biden’s plans.
“I think that 25% is fine,” Peters said. “It doesn’t disadvantage our companies, and in turn our employees, workers…I think 25% is the right spot.”
NEW: Another House Democrat, NJ Rep. Bill Pascrell, joins the “No SALT, No Deal” pledge to oppose any tax plan without a repeal of the SALT cap.
Pascrell joins NJ Rep. Josh Gottheimer and NY Rep. Tom Suozzi. One more and they can block legislation. pic.twitter.com/cL6RcoWqMI
— Andrew Solender (@AndrewSolender) March 30, 2021
The SALT deduction allows taxpayers to write off state and local taxes and is aimed at providing a tax credit for local services like schools and emergency services. It was capped at $10,000 as part of the Tax Cuts and Jobs Act passed by Republicans in 2017. Senate Majority Leader Chuck Schumer, House Speaker Nancy Pelosi and Biden have all advocated for its repeal, but critics argue it overwhelmingly benefits wealthy taxpayers.
BIG NUMBER: 7. That’s the size of Democrats’ majority in the House, meaning they can only lose three votes on any legislation otherwise passed along party lines. A number of other blue state and suburban Democrats have championed the SALT cap repeal, while some moderates, particularly Rep. Jared Golden (D-Maine), have proven more than willing to buck the party on big-spending packages.
Democrats only hold a 7-seat majority in the House, so it is certainly bad news if they already have 3 lawmakers who will vote against this radical idea.
The U.S. Senate is tied 50-50, meaning even if House Democrats barely pass this measure, it will be tanked if just one Democrat votes against it in the upper chamber.
West Virginia Democrat Sen. Joe Manchin has already suggested he wouldn’t support a corporate tax rate of 28%.