Three moderate Democrats in the House of Representatives are reversing their position on the state and local tax (SALT) deduction’s inclusion in a budget reconciliation agreement, clearing the way for the $740 billion Inflation Reduction Act to pass the lower chamber.
Reps. Josh Gottheimer and Mikie Sherrill of New Jersey and Tom Suozzi of New York announced in fall 2021 that they would oppose any budget reconciliation agreement that did not include an increase of the SALT cap. The 2017 Tax Cuts and Jobs Act set the cap at $10,000, meaning taxpayers can deduct up to $10,000 paid toward state taxes from their federal tax burden. The federal government did not set a cap on that deduction before 2017, and the cap predominantly affects wealthy residents of Democrat-run states.
However, all three Democrats are dropping their opposition and will support the Inflation Reduction Act, as they said after the bill passed the Senate on Sunday. The Inflation Reduction Act does not touch the SALT deduction, which Democratic West Virginia Sen. Joe Manchin has called a “loophole” for “red state or blue state elites.” (RELATED: From Climate Change To Tax Cuts, Major Parts Of Democrats’ $2T Spending Bill Could Be On Senate Chopping Block)
Gottheimer, Sherrill and Suozzi claimed they will support the bill because it does not raise taxes on their constituents. Although the bill does not impact the personal tax code, it will still likely raise taxes on Americans in every bracket, the Congressional Joint Committee on Taxation found.
“After careful review, it is clear that the Inflation Reduction Act is good for the families and small businesses in northern New Jersey. This bill passes my key test that I’ve pushed for since day one: it does not raise taxes on individuals, families, or small businesses in my District,” Gottheimer said in a statement.
This bill passes my key test that I’ve pushed for since day one: it does not raise taxes on individuals, families, or small businesses in my District. The Inflation Reduction Act makes no changes to personal income tax rates or those impacting small businesses. pic.twitter.com/EJhh5EOHjr
— Rep Josh Gottheimer (@RepJoshG) August 7, 2022
“I will also remain steadfast in my commitment to ensuring that any discussion of reforms to the 2017 tax law begins with addressing SALT. Because this legislation does not raise taxes on families in my district, but in fact significantly lowers their costs, I will be voting for it,” Sherrill added.
“If they don’t touch personal income taxes it doesn’t really raise the specter of SALT,” Suozzi, who is not running for re-election, said.