Moderate Democrats want Biden spending plan to eliminate SALT cap

A fight over the cap on state and local tax deductions could prove Democrats’ next hurdle in passing their $3.5 trillion budget reconciliation package.

A host of moderate Democrats — many from New York and New Jersey — have protested former President Donald Trump’s 2017 tax cuts for capping how much taxpayers in their states can deduct from their federal tax obligation.

Reps. Josh Gottheimer, Mikie Sherrill, Bill Pascrell of New Jersey and New York’s Thomas Suozzi say they won’t support any legislation that doesn’t restore the full deduction for state and local taxes, known as SALT.

“We need to have this state and local tax deduction. We built a whole system around it,” said Suozzi, who since 2017 has represented parts of Long Island and northeastern sections of Queens, New York. “People are leaving our states. And when they leave, it leaves behind a hole in our revenues.”

“We’re in a competition with states that do not insure their children, do not pay their teachers, do not have mass transit and think that climate change is a hoax,” he said. “And as a result, their costs are cheaper.”

Trump’s tax law limited SALT deductions to $10,000, meaning that residents in higher-tax states like New York and New Jersey could no longer deduct the full value of their state tax obligation from their federal bill. No limit existed before the Trump tax cuts.

While some politicians had left room for negotiating the cap higher, Sherrill doubled down on her view that the limit ought to be completely eradicated.

“I really think that what is required here is a full repeal,” Sherrill said in a phone interview.

“Because I think not only is it something that would be helpful as we try to recover the economic engine that is New Jersey … but I also think that it is a value in our tax system,” she added. “That if we are going to fund things like our teachers, and our cops, and our schools through state and local taxes, that you don’t hinder a state’s ability to do so.”

Suozzi also wants a full repeal.

“I am completely opposed to an increase to the cap. That would be a great political victory because it would help a lot of people in my district and in many districts throughout the country,” he said. “But it wouldn’t address the policy issue, which is that people are leaving our states. And that’s bad policy for us.”

Gottheimer, Sherrill, Pascrell and Suozzi all represent wealthy districts compared with the national average. Of the four, Pascrell is the only one to represent a district with a median household income below $100,000, according to recent Census data.

Some of their more-progressive peers say that lifting the cap would disproportionately benefit the wealthiest American households.

Rep. Alexandria Ocasio-Cortez, D-N.Y.,…