Latest bid to overturn SALT cap fails

A measure to lift the federal deduction cap on state and local taxes failed to advance on a procedural vote in the House Wednesday, dooming the latest effort by high-tax state lawmakers to kill the controversial law.

The SALT Marriage Penalty Elimination Act, sponsored by Rep. Mike Lawler, R-N.Y., would have doubled the current $10,000 cap for married couples making less than $500,000. A rule that would have advanced the bill failed by a vote of 195 to 225, with 18 Republicans joining all Democrats to vote no.

Long a thorn in the side for both Democratic and Republican lawmakers from high-tax states like New York, New Jersey and California, the federal deduction on state and local taxes was capped at $10,000 as part of the 2017 Tax Cuts and Jobs Act. Since 2019, repeated efforts to overturn or lift the cap have failed. Municipal issuers have said the cap infringes on their own ability to levy future taxes, and the Government Finance Officers Association calls the deduction "fundamental to the way states and localities budget for and provide critical public services, and a cornerstone of the U.S. system of fiscal federalism."

The conservative-leaning Tax Foundation estimates the bill would have cost $11.7 billion for tax year 2023.

The cap is set to expire at the end of 2025 along with other provisions from the TCJA.

Bloomberg News

New York Republican Rep. Nick LaLota said blue-state Democrats have repeatedly supported measures to overturn the cap but voted against the rule this time because "they just don't want to give us a political win."

During a speech on the House floor, LaLota acknowledged the measure would benefit blue states more than red states, noting that New York State's top income tax rate of 10.9% gives the state the "dubious distinction of having the highest taxes in this great nation of ours."

But "it cannot be said truthfully that red states are subsidizing blue states," he said. "The data demonstrates the opposite actually: that blue states like mine are giving far more to Washington than we get back," he said. "Why do you think so many are fleeing my state for Texas and Florida?" he asked. "It's not just for the weather."

The SALT Caucus has 30 members from both sides of the aisle. Rep. Tom Suozzi, a New York Democrat who won a special election Tuesday, has long been a vocal proponent of eliminating the cap, and said in his victory speech this week that it would remain one of his priorities.