Democrats are struggling to come to an agreement on how to lift the Trump-era tax deduction cap that hit many Californians hard and became one of the last unresolved issues in their social spending and climate laws.
Democrats are expected to grant some relief from the $ 10,000 annual cap set for state and local taxes that can be deducted from federal tax returns. The so-called SALT cap was put into effect in the GOP tax bill of 2017.
But progressive Democrats in the House and Senate disagree on how to do this.
The final proposal, which is likely not to be finalized by the end of the month, could have a significant impact on California residents and residents in other high-tax states, including New York and New Jersey. Because of the importance of this policy to legislators in these states, many Democrats believe that the bill cannot go through the House of Representatives without some help from the SALT.
The dueling proposals, released on Wednesday, underscore tense negotiations over the social spending bill, even as House Democratic leaders are trying to schedule a vote before the end of the week.
House Democrats, led by Representative Tom Malinowski of New Jersey – arguably the state hardest hit by the restriction – and Rep. Katie Porter (Irvine Democrat) will raise that cap to $ 72,500 by 2031.
Porter calls it a deficit-neutral proposal that “will reverse the harshest consequences of Trump’s tax law,” ensuring that people don’t get hit by the restriction because of where they live.
The $ 72,500 figure was chosen because if Congress had complicated methods of calculating the cost of its bill, the policy would have cost the federal government nothing. This is because, under current legislation, the Trump-era cap is set to end in 2025. This plan will keep the limit longer, but at a higher threshold.
But Senator Bernie Sanders (I-Vt.) Criticized the plan, saying it would cost more than $ 50 billion a year and “provide 37% of its benefits to the top 1% … giving the richest people in the country tax breaks. … “
There are other critics of the Senate as well. Senator Michael Bennett (Colorado Democrat) said the House plan “cuts taxes for millionaires and billionaires at the expense of low- and middle-income families.” We need to fix this in the Senate. “
Sanders and Senator Robert Menendez (DN.J.) have released an alternative plan that will remove the cap for families earning less than $ 400,000 a year.
“We still need to do a little bit of work on income here,” Sanders said. But it won’t be “for millionaires or billionaires.”
Porter criticized the proposal because she said it would still benefit wealthy hedge fund managers and entrepreneurs who find ways to avoid reporting annual income.
“I don’t think – with much respect for Senator Sanders’ commitment to the big corporations and the super-rich paying their fair share – I don’t think his proposal does what he thinks,” she said.
Regardless of the tax breaks the House of Representatives adopts on social spending, the Senate could still change that position in the coming weeks.