Democrats Aim for SALT Write-Off Expansion in Stimulus Bill

Two New Jersey Democrats are leading an effort to expand a valuable tax break for state and local levies in the next virus-relief package, a long-shot effort as lawmakers continue to squabble over the size and scope of the next round of stimulus.

Representatives Josh Gottheimer and Bill Pascrell, both Democrats representing northern New Jersey districts, are calling on House Speaker Nancy Pelosi, Senate Majority Leader Chuck Schumer and Treasury Secretary Janet Yellen to include a full repeal of the $10,000 limit on deductions for state and local taxes, or SALT, that was part of the tax law former President Donald Trump signed in 2017.

“This is key to the health of our economy, key to keeping our state strong,” Gottheimer said at a press conference in Paterson, New Jersey, on Wednesday. “It’s essential to hardworking middle class families who have been crushed by this pandemic and crushed by the SALT cap.”

The effort is likely to be a hard sell, at least in the short run, as Democrats and Republicans struggle to agree on an economic stimulus package that goes beyond more vaccine funding. Democrats are already making moves that would allow them to use the budget reconciliation process, a fast-track procedure to pass some economic relief with only Democratic votes.

Even then, SALT could be controversial because the benefits largely flow to higher-income households in high-tax states, while the pandemic’s toll has been concentrated on lower earners. Yellen said at her confirmation hearing this month that the SALT cap’s impact on municipal governments and residents warrants more study before taking action.

Yellen has appeared to downplay the possibility that a repeal of limit on the SALT deduction could be included in the upcoming stimulus bill. In follow-up answers to Senate questions after her confirmation hearing, she said Biden’s rescue plan does not include a proposal to expand the SALT deduction.