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Senate Dems to Force Vote on IRS SALT Cap Rules

Yuval Rosenberg

Senate Democrats say they will force a vote Wednesday to nullify IRS rules implemented to prevent blue states from creating workarounds to the $10,000 cap on state and local tax (SALT) deductions enacted as part of the 2017 Republican tax law.

“On Wednesday, Senate Democrats will force a vote to nullify the IRS’s horrible rule and put power back in the hands of homeowners,” Senate Minority Leader Chuck Schumer (D-NY) said in a statement. “America’s homeowners shouldn’t be forced to bear the brunt of the GOP’s political games.”

The background: The $10,000 limit on SALT deductions was included in the 2017 law as a way to raise hundreds of billions of dollars in revenue to offset some of the cost of other tax cuts. Republicans also argued that the deduction subsidized high taxes in states including California, New York, New Jersey and Illinois and that it was appropriate that the new cap would pressure those states to lower taxes.

Critics, including Democrats and Republican lawmakers from high-tax states, argued that the cap would hurt their residents and would threaten the public services offered by their states. But the IRS in June blocked efforts by high-tax states to create programs to circumvent the cap.

Why it matters: The battle over the controversial cap lives on. Democrats may face a challenge in getting the votes required for their resolution to pass in the Republican-controlled Senate. But House Democrats are reportedly working on legislation to undo the cap. Repealing the cap would lower taxes for an estimated 13.1 million tax filers — 94% of whom have income of $100,000 or more, according to estimates by the Joint Committee on Taxation. “This issue generates a level of passion that is almost unrivaled by anything else,” Rohit Kumar, a former aide to Senate Majority Leader Mitch McConnell, told Bloomberg recently. “There is political value in being seen as fighting for something even though they know in their heart of hearts that it won’t happen.”

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