Democrats have limited legislative paths to expand the federal deduction for state and local taxes if President Joe Biden’s economic agenda remains stalled indefinitely because of Senator Joe Manchin’s opposition.
A vocal group of Democrats, largely representing high-tax areas in New York, New Jersey and California, have made the state and local tax—or SALT—write-off a must-include provision of the roughly $2 trillion tax and spending bill.
But if that legislation can’t get through Congress, lawmakers have little hope of finding another way to expand the tax break before the end of next year. That’s because it’s unlikely to move as a standalone bill, facing headwinds among some Democrats.
Manchin, the moderate West Virginia Democrat who said Sunday he can’t vote for Biden’s signature bill after months of negotiations over the package, is a crucial swing vote in the Senate. His announcement likely means Biden’s tax-and-spending bill won’t pass in the short term—or potentially ever.
That would deprive a coterie of Democrats of being able to campaign on bigger SALT breaks, which they had hoped their voters would see on their tax returns in the next few months. The deduction is a politically important benefit for about two dozen Democrats who represent constituents with high state and local tax bills on their incomes and homes.
‘Hopeful’ Lawmaker
Democrats who have been advocating for a SALT-cap expansion since Biden took office say they are continuing to seek a way to salvage a deal, despite Manchin’s assertions that he cannot support the legislation.
“I am hopeful that we can find common ground to help lower prescription drug costs, cut taxes for middle class families with SALT, invest in pre-k for children and accomplish other common-sense priorities,” Representative Josh Gottheimer, a New Jersey Democrat, said in a tweet Sunday. “I will do my part to help bring everyone back to the table.”
The write-off isn’t universally beloved in the party. For one, it’s not a particularly important issue in areas with lower taxes. In addition, some progressives—including New York Representative Alexandria Ocasio-Cortez—oppose many of the efforts to make the tax break, which largely benefits higher-earners, more generous to taxpayers.
I am hopeful that we can find common ground to help lower prescription drug costs, cut taxes for middle class families with SALT, invest in pre-k for children, and accomplish other commonsense priorities.
I will do my part to help bring everyone back to the table. (1/2)
—Rep Josh Gottheimer (@RepJoshG) December 19, 2021
Gottheimer, a moderate, was one of a handful of House Democrats who pushed to de-link the Build Back Better agenda from the bipartisan infrastructure legislation that the House passed in November. Progressives had wanted to pass the two bills simultaneously, so that they had leverage to make sure Biden’s social agenda didn’t get killed in the Senate—as, for the moment, now seems likely.