SALT-Expansion Dreams Die as Biden Tax Bill Heads to House

What You Need to Know

Democrats had threatened to tank the bill if it failed to include the valuable tax break, which largely benefits those in high-tax states like New York and California.

The House Democrats who had threatened to block President Joe Biden’s tax and climate plan unless it also expanded the deduction for state and local taxes are now signaling they’ll back the legislation when it comes up for a vote later this week.

Representatives Josh Gottheimer, Tom Suozzi and Mikie Sherrill, who have led efforts for months to include an increase to the $10,000 cap on deductions for state and local tax, or SALT, said they will vote for the tax and climate bill passed by the Senate on Sunday even though it doesn’t address the write-off.

“Because this legislation does not raise taxes on families in my district, but in fact significantly lowers their costs, I will be voting for it,” Sherrill of New Jersey said in a statement.

Gottheimer, also of New Jersey, said that his “line in the sand remains the same” on SALT, and he will insist that it is included in any future bill that would increase taxes for households in his district. New York’s Suozzi also supports the bill.

The lack of opposition from the self-dubbed “No SALT, no deal” caucus eliminates nearly all doubt that House Democrats will pass the legislation. Progressive Democrats, who had been pressing for more aggressive measures on climate also have indicated they’ll back the $437 billion package.

The House is scheduled to return to Washington on Friday to vote on the bill that Democrats have named the Inflation Reduction Act.

Tax Issues

The Senate-passed bill included several business tax increases, including a 15% minimum tax on corporations, a stock buyback tax and an extension of a provision that limits how much in losses passthrough entities can write off in a given year.

Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, the moderate Democrats who shaped much of the bill, rejected many of the tax proposals initially made by Biden.

For months, Democrats pushing for SALT had threatened to tank the bill if it failed to include the valuable tax break, which largely benefits residents of high-tax states in the Northeast and West Coast.

The House passed a version of the bill last year that raised the deduction cap to $80,000 from $10,000 per household. However, after much of the bill was stripped to win over Sinema and Manchin, Democrats were essentially forced to accept the legislation as-is.