War on tax deduction cap is dividing Democrats

The SALT showdown brewing in Congress over the question of removing a $10,000 cap on state and local tax deductions is roiling the Democratic party.

The cap, a creation of President Trump’s Tax Cuts and Jobs Act of 2017, disproportionately affects New York and other blue states with high local taxes. Before the Trump reform, federal income taxpayers were able to deduct all local and state taxes from their tax bill, no matter how rich they were or how much they were paying in local property taxes.

Long Island Rep. Tom Suozzi says he is prepared to hold up President Biden’s emerging infrastructure bill if the cap removal is not included in its final text.

“We have spoken with folks in the White House about this and we have spoken with leadership and there is a conversation going on,” Suozzi told The Post, who reiterated he would not compromise on the ‘no SALT no deal’ pledge he made last month.

“I’m not moving,” said Suozzi, who leads a small but critical clutch of Democrats on the issue and could potentially gum up Biden’s ambitious first-term agenda.

While it’s unclear exactly how many Democratic lawmakers will impose similarly uncompromising red lines, House Speak Nancy Pelosi has few members she can spare. Democrats outnumbers Republicans in the House 218 to 211. And there is evidence to suggest that enough Democratic lawmakers are committed to the issue to force the issue — if they want to.

Though a bipartisan “SALT caucus” has been formed to fight against the cap and includes some Republicans like Staten Island Rep. Nicole Malliotakis and Long Island Rep. Andrew Garbarino, most Republicans in Congress opposed removing the cap in a 2019 vote and there is no reason to assume their votes will change now — particularly if the cap removal is tied to a Biden infrastructure bill they will almost certainly oppose.

In New York alone all but two members of the Democratic delegations signed a letter last week warning that they “reserve the right to oppose any tax legislation” that didn’t include nixing the cap.

Team Biden, however, has been noncommittal. Though it’s taken a bite out of New York’s city and suburban taxpayers, the cap has been a revenue gusher for the feds and part of how the White House plans to fund what is expected to be a sprawling infrastructure bill. Removing the cap would cost the feds $88.7 billion in revenues in 2021 alone according to the nonpartisan Joint Committee on Taxation.

The issue has divided progressives. Repealing the SALT cap would overwhelmingly favor the top quintile of American households and steer considerably more wealth to the top 1% of Americans than the Trump tax cuts did, according to the nonpartisan Tax Policy Center.

But Suozzi and other cap-haters insist the middle class will benefit. They insist that families making $100,000 to $150,000 in the tri-state area are not rich and they pay inordinately high property taxes when compared to the rest of the country.

Rep. Alexandria Ocasio-Cortez, who voted against repealing the cap in 2019, declined to join her colleagues on the SALT letter and instead has blasted the cap repeal as a “gift to the billionaires.” But she acknowledged the cap has hurt some NY homeowners and seems open to a compromise.

“There are a lot of [New Yorkers], particularly homeowners impacted by the SALT change in 2017 that just want to go back. Some of these people bought homes and are still on a tight budget, and the SALT change made things suddenly really difficult on them overnight,” Ocasio-Cortez told The Post, when asked to reflect on why so many of her traditional allies had abandoned her on this issue. “I think we can at least have a compromise about amending the cap so that the middle class families being squeezed can get relief while ensuring that we don’t authorize a giveaway to the rich.”

AOC has found few allies among her fellow squad members, who all voted to nix the cap in 2019.

Among the city’s newest rising progressive stars, Reps. Jamaal Bowman, Mondaire Jones and Ritchie Torres have all indicated they wish to see the cap removed. Bowman and particularly Jones have pockets of wealthy constituents who have been hard hit by the cap.

Bowman conceded the deductions would mostly go to the wealthy, but defended his position saying he needed “to be responsive to the needs and priorities of our constituents.” Torres, who represents a very poor district, declined to comment.