House Speaker Nancy Pelosi signaled support this week for including a repeal of the $10,000 cap on state and local deductions in President Biden's sweeping spending proposal.
“Hopefully we can get it into the bill," Pelosi said during a Thursday news conference. "I never give up hope for something like that."
Several Democrats from New York and New Jersey this week threatened to withdraw support for the $2.25 trillion infrastructure measure, dubbed the American Jobs Plan, unless the Trump-era deduction limit is lifted.
Pelosi called the deduction cap, which was imposed by Republicans with the passage of the 2017 tax overhaul, "devastating" to taxpayers in her home state of California and said she is "sympathetic" to rank-and-file members' push to roll back the deduction limit.
But the hard-line from the group of moderate Democrats could put the bill's passage at risk: Unless 10 Republicans break with Senate Minority Leader Mitch McConnell, who slammed the plan as a "Trojan horse" for major tax hikes, or the White House significantly changes its offer, Democrats will almost certainly have to pass the measure via budget reconciliation, the obscure Senate rule the party used last month to approve Biden's $1.9 trillion American Rescue Plan without a single GOP vote.
If Democrats decide to pass the measure on a party-line vote via reconciliation, they can stand to lose no members in the Senate and just three in the House, assuming all GOP lawmakers are aligned against the bill.
Eliminating the SALT deduction cap would require Democrats to vote for a policy that disproportionately benefits wealthy Americans living in blue states. Households earning at least seven figures a year would receive the majority of the benefits, according to the Joint Committee on Taxation.
The White House has said it welcomes feedback from lawmakers on how best to address infrastructure, which is broadly viewed as a bipartisan issue in Washington, but has remained cool to the idea of a SALT tax repeal.
“If Democrats want to propose a way to eliminate SALT, which is not a revenue raiser, as you know, it would cost more money, and they want to propose a way to pay for it, and they want to put that forward, we’re happy to hear their ideas,” White House press secretary Jen Psaki said Thursday during a press briefing.