Are SALT Caps Returning To High-Earners In New York, California In New Biden Tax Plan?

A cap on state and local tax deductions, known as SALT, may find its way back into the final text of President Joe Biden’s $1.85 trillion spending bill.

On Friday, the Wall Street Journal reported that a repeal of the SALT caps that accompanied former President Donald Trump’s 2017 tax cut bill is still possible. The limit was placed on SALT which limited deductions to only $10,000 and it primarily impacted states like New York, California and New Jersey, all Democratic-led states.

One idea under consideration is to remove the cap for 2022 and 2023 and reinstate it in 2026 and 2027. However, any mention of a SALT cap repeal was not included in the framework shared by the president on Thursday, but it has been a priority for many moderate Democrats from the Northeast.

Last month, House Ways and Means Committee chairman Richard Neal, D-Mass., and two other congressmen from New York and New Jersey shared a joint statement to make clear their commitment to pushing for SALT relief. They said that the restoration of SALT relief would be a boon to middle-class communities.

However, in a rare case of alignment, both progressives and Republicans oppose the repeal of the SALT cap. Republicans argue that the deductions were providing what they consider an unfair subsidy to wealthy states like New York whereas progressives say the benefits of these deductions are eaten up by only the wealthiest in the states that benefit.

According to the nonpartisan Tax Policy Center, the top 20% of taxpayers may receive more than 96% of the benefit of a SALT cap repeal and the top 1% would see about 54% of the benefit.

Rep. Bill Pascrell, D-N.J., released a statement where he expressed confidence that SALT relief would be included in the final bill and reiterated his support for the cap repeal. Rep. Tom Suozzi, D-N.Y., however, warned his party on Thursday that he would not sign on to any deal that leaves out SALT.

"No SALT, no deal! I am confident it will be part of the final deal," Suozzi tweeted on Thursday morning.