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House Ways and Means Committee to Continue State and Local Tax (SALT) Cap Discussions

 

By Adam O’Feeney, CironeFriedberg, LLP

Having returned from August recess, Congress is back to work and picking up right where they left off before the break.  Discussions over the past week have focused on addressing the tax extenders, Tax Cuts and Jobs Act (TCJA) technical corrections, and other tax measures. 

As part of these discussions, House Ways and Means Committee Chairman Richard Neal (D-Mass.) has promised a “full-throttle discussion” on the $10,000 cap on the state and local tax deduction in the coming weeks.  The $10,000 limit was, of course, placed on the federal deduction for state and local taxes by the TCJA enacted back in 2017 and has remained a hot-button issue for millions of Americans -- especially here in the northeast.  Democrats have largely voiced criticism of the SALT cap since its inception, and this is their next step toward a potential repeal.

The expectation is that within one week of discussion, an agreement has been reached on an approach to the issue to be introduced in October 2019.  Members have not detailed the agreement nor its revenue sources, but reports say Rep. Bill Pascrell (D-NJ) is suggesting it would include elements of both his bill (H.R. 1142) to repeal the cap and pay for it by restoring the 39.6% top individual income tax rate and Rep. Tom Suozzi’s (D-NY) bill (H.R. 257).  Suozzi’s bill would simply repeal the cap altogether, but he has suggested relief from the cap could be paid for by restoring the top individual tax rate and increasing the corporate tax rate to 25%.  A third bill (H.R. 1757) has also been introduced as an option to increase the cap to $15,000 for individuals and $30,000 for couples (paid for with a corresponding undisclosed increase in the corporate tax rate).

Other sources are suggesting the Democrat’s push-back on the SALT cap is considered on Capitol Hill to be geared more toward symbolism rather than actual legislative change, and that any Democratic-backed measure to repeal or scale back the cap would almost certainly be “dead on arrival” in the Republican-controlled Senate.

Although only in the early stages of discussion, this is certainly a topic to keep an eye on in the coming weeks. A complete repeal of Republican reforms will likely be difficult to enact unless Democrats were to claim a majority in both the House and Senate in 2020; however, both sides seemingly working together to “outline a plan” as it relates to the SALT cap is a sign of progress, and one to monitor closely.

 
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