On December 19, the House approved by a 218-206 vote 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% through 2025.

The bill would also increase the dollar limitation to $20,000 for married individuals filing a joint return and $10,000 for a married individual filing a separate return for 2019. Other provisions would 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.

In an unusual turn of events, a Republican Motion to Recommit (MTR) to amend the bill and redirect that tax cut (from lifting the cap) for individuals making more than $100 million toward a tax deduction for teachers and first responders was approved 388-36. Minority party MTRs are routinely turned away prior to passage of House bills.

The SALT deduction cap was enacted in the TCJA, and the Republican-controlled Senate is not expected to take up H.R. 5377, meaning the votes are largely symbolic. The base bill's increase in the SALT cap limitation for 2019 and elimination for 2020–2021 would cost $184.5 billion over a 10-year period, and the increase in the top marginal individual income tax rate to 39.6% would raise $190.7 billion.

Echoing a Wall Street Journal editorial this week, Rep. Lee Zeldin (R-NY), whose state is affected by the SALT deduction cap, criticized the bill for increasing the marginal rate for a longer duration than the deduction cap relief.

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. "This bill truly is a tax cut for the few," House Ways and Means Ranking Member Kevin Brady (R-TX) said December 19, adding that with the bill Democrats have claimed the mantle of the "party of the rich."

———————————————