House blocks effort from New York Republicans to boost ‘SALT’ tax deduction

By KEVIN FREKING
Associated Press

WASHINGTON (AP) — A longshot bid to temporarily double a $10,000 cap on state and local tax deductions for most married couples went down to defeat Wednesday in the House.

The limit was put in place as part of the sweeping tax cuts that a Republican-led Congress passed during then-President Donald Trump’s administration. The so-called SALT cap has led to bigger tax bills for many residents of New York, New Jersey, California and other high-cost, high-tax states, and is an important campaign issue in those states.

A procedural vote to bring up the legislation was rejected by a vote of 195-225.

While unsuccessful, the vote gave Republicans in swing congressional districts the chance to show they’re fighting to get tax relief for constituents now unable to fully deduct the amount of local and state taxes they pay. It’s a particularly important issue for the Republican members of the New York delegation, some serving in districts that President Joe Biden won in 2020.

Underscoring the political dynamics at play, the vote came just one day after Democrats took back one House seat in New York, with Tom Suozzi winning the seat left vacant last year when Republican Rep. George Santos was expelled from office.

“I think it shows the people back home that the Republicans they sent here in Biden districts fought hard to get it onto the floor,” said Rep. Anthony D’Esposito, who represents one of those districts.

Democrats used the debate Wednesday to remind the bill’s supporters which party was responsible for imposing the $10,000 cap. Republicans limited the deduction to help pay for other tax cuts in the 2017 package. They also cast the vote as an “election ploy to help New York Republicans win the next election.”

“They created this problem that they now want to put a band-aid on,” Rep. Teresa Leger Fernandez, D-N.M., said of House Republicans.

Under current law, the $10,000 cap applies to single filers and married couples filing jointly. The bill from Rep. Mike Lawler, R-N.Y., would double the cap for married couples who file taxes jointly and make up to $500,000. The change would only apply to the 2023 tax year. Lawler said the current cap penalizes married couples.

Nearly half of taxpayers in his district claimed the state and local tax deduction before the law was changed during the Trump administration. Now, it’s about one in five, he said. Nationally, the percentage of taxpayers claiming the deduction has dropped from about 31% to 9%, he said.

“This stark decrease has disproportionately impacted high-cost states like New York where the cost of living far exceeds the national average,” Lawler said.

After the vote, Lawler said New York Republicans fought for their districts and the state, and “New York Democrats helped tanked the bill.” He said Democratic leader Hakeem Jeffries urged colleagues to vote against the procedural rule.

“I think it’s unfortunate New York Democrats tanked the rule and did not allow for an up-or-down vote on the bill,” Lawler said.

The issue transcends political parties. Eighteen Republicans hailing from states where the cap on the deductions is not an issue for the vast majority of taxpayers also voted against the rule allowing for consideration of the measure. Every Democrat also voted against moving forward.

Analysts say that eliminating the cap, or even just doubling it for married couples filing jointly, would deprive the federal treasury of revenues and increase federal deficits. They also said the adjustment would primarily benefit higher-income households.

The $10,000 cap, like many of the 2017 tax bill provisions, will expire on Dec. 31, 2025, positioning tax policy near the top of the list of issues to be considered in the next Congress. That expiration date conceivably gives lawmakers from New York, New Jersey and other states most heavily impacted by the cap more leverage to force a change.