The House Ways and Means Committee December 11 approved 24-17 a bill (H.R. 5377) to eliminate the $10,000 State and local tax (SALT) deduction cap for 2020–2021, paid for by increasing the top marginal individual income tax rate to 39.6%.

The bill would also increase the dollar limitation on the deduction of certain State and local property, income, and sales taxes to $20,000 for married individuals filing a joint return and $10,000 for a married individual filing a separate return for 2019. Chairman Richard Neal's (D-MA) substitute amendment added provisions to increase the maximum dollar amount of the deduction for certain expenses of eligible educators to $500 and add an above-the-line deduction for certain expenses of first responders.

The SALT deduction cap was approved in the Tax Cuts and Jobs Act (TCJA), and the Republican-controlled Senate is not expected to take up H.R. 5377. The increase in the SALT cap limitation for 2019 and elimination for 2020–2021 would cost $184.5 billion over 10 years.

During the markup, Rep. Tom Suozzi (D-NY) discussed how the SALT deduction cap represents a tax increase that harms suburban households that the TCJA was supposed to help. Rep. Judy Chu (D-CA) said the SALT deduction cap affects middle-income citizens like teachers and firefighters. Not all Democrats were on board. Rep. Stephanie Murphy (D-FL) lauded the fiscal responsibility of the bill but said she could not support it because Florida, without a state tax, is not impacted by the cap in the same way. She argued that major TCJA changes should be considered comprehensively, not in a "one-off" matter.

Republican members said the bill would disproportionately benefit the wealthy, the same argument Democrats made in the run-up to and since the enactment of the TCJA. Ranking Member Kevin Brady (R-TX) said the SALT deduction cap relief bill represents a huge tax cut for millionaires and billionaires. "This regressive legislation is a starter pistol for a new race among state and local leaders to raise property taxes, sales taxes, and income taxes even higher on working families and local businesses. As if these unpopular taxes aren't brutal enough," Brady said.

Rep. Tom Rice (R-SC) said cutting taxes for higher-incomes would require lower-income citizens to pay more. Rep. Mike Kelly (R-PA) said where to live is a choice, and lower-income citizens shouldn't be called on to subsidize those with higher incomes.

As for the practical prospects for the bill, Rep. Jackie Walorski (R-IN) said during the markup, "This bill has no shot in the Senate." Rep. Adrian Smith (R-NE) said members should be spending time trying to advance tax extenders and TCJA technical corrections rather than focusing on a bill that isn't going anywhere.

Rep. Jodey Arrington (R-TX) offered an amendment to shield pass-through income from the individual rate increase, and it was defeated 15-21. Rep. Brad Wenstrup's (R-OH) amendment to nullify the effect of the bill if a state increases property taxes was defeated 16-21. Rep. Drew Ferguson's (R-GA) amendment that was also intended to prevent the bill from subsidizing high state taxes was defeated 15-21.

Rep. Rice offered an amendment to restrict the bill's SALT cap relief to the bottom 90% of Americans by income and deny it to the top 10%. Rep. Mike Thompson (D-CA) criticized the amendment for striking the individual tax rate increase in the underlying bill. The amendment was defeated 15-22. Rep. Walorski's similar amendment to ensure the wealthiest 1% don't benefit from the legislation was defeated 16-22.

Rep. Dave Schweikert's (R-AZ) amendment to delay the effect of the bill until more information can be provided by Treasury on economic effects was defeated 15-22. Rep. Smith's amendment to make permanent the current level of the standard deduction was defeated 17-23.

The Committee also approved a bill (H.R. 5306) to clarify the requirement for the Social Security Administration (SSA) to mail an annual Social Security Statement to all workers ages 25 and older with covered earnings, who are not receiving Social Security benefits.

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