With lawmakers scrambling to pass a new coronavirus stimulus bill as enhanced unemployment benefits expire on Friday, Senate minority leader Chuck Schumer (D., N.Y.) is pushing to repeal the cap on the state and local tax (SALT) deductions that primarily benefit high earners in states with high taxes.
The debate over money for state and local governments in the second stimulus bill has been contentious, with Democrats signaling they would need another $15 billion to help public transportation systems, this in addition to the roughly $900 billion they had previously requested.
In a Thursday night meeting to discuss the stimulus package with White House chief of staff Mark Meadows, Treasury Secretary Steven Mnuchin and House speaker Nancy Pelosi, Schumer suggested repealing SALT caps, Politico reported.
Earlier this month, Schumer urged Senate majority leader Mitch McConnell (R., Ky.) to “join the House, and join the Democrats in the Senate, and get rid of that cap.” He said then that keeping a provision in the House coronavirus relief bill passed in May that would repeal the SALT deduction cap for two years is a top priority for Senate Democrats, along with assistance for state and local governments and money for schools.
“We need to cushion the blow of this virus,” Schumer said earlier this month. “The SALT cap hurts people affected by the virus. It hurts so many of the metropolitan areas like New York.”
The SALT deduction was capped at $10,000 by President Trump’s 2017 tax-cut law. Republicans included the cap to raise revenue to offset the cost of other tax cuts in the bill and argued that the cap would help prevent the federal tax code from subsidizing higher state taxes.
Schumer said that Senate Democrats would make it a priority to permanently eliminate the SALT deduction cap if they are in the majority in 2021.
“I want to tell you this: If I become majority leader, one of the first things I will do is we will eliminate it forever,” he said. “It will be dead, gone and buried.”
Most Republicans oppose repealing the cap, saying that a repeal would primarily benefit high-income people in coastal states. McConnell has criticized the SALT deduction cap rollback in the House bill, arguing the measure “would change tax law to provide massively expensive gifts to wealthy people in high-tax blue states.”