Senate Rejects Attempt to Repeal Workarounds of $10,000 SALT Limitation


Senate rejects attempt to repeal Treasury rule for workarounds by several states to bypass $10,000 SALT limitation.

The 43-52 vote Wednesday was mostly along party lines. However Republican Rand Paul crossed and Democrat Michael Bennet, a 2020 Democratic presidential contender, voted against it.

“It’s bad enough that my Democratic colleagues want to unwind tax reform, but it’s downright comical that their top priority … is helping wealthy people in blue states find loopholes to pay even less,” Senate Majority Leader Mitch McConnell said.

The rule went into effect Aug. 11, but the Congressional Review Act gives Congress a limited amount of time to overturn new federal rules. A similar repeal was filed in the House, but since the law requires both chambers to act within 60 legislative days, the Senate vote effectively ends the effort.

Democrats described the limitation as aimed at their constituents, with Senate Minority Leader Charles E. Schumer of New York saying that voter anger over the SALT cap was “one of the major reasons the House flipped from Republicans to Democrats.”

The vote put Democratic presidential candidates in an awkward position.

Bennet said the SALT cap was designed in the first place “to take revenge against people who didn’t vote for Donald Trump, to take revenge against some deep-blue states and districts.” However, he urged fellow Democrats to recognize that the “vast majority” of the benefit of any repeal would go to the wealthiest households.

“We can say we’re for a progressive tax bill and for fighting inequality, or we can support the SALT deduction, but it’s really hard to do both of those things,” Bennet said.

Of the other Democratic senators running for president, New Jersey’s Cory Booker and Minnesota’s Amy Klobuchar voted to repeal the Treasury rule and loosen the SALT cap. Vermont independent Bernie Sanders, Elizabeth Warren of Massachusetts and Kamala Harris of California weren’t present for the vote.

Republicans spoke of a Joint Committee on Taxation report that found that if the SALT cap were repealed for 2019, 94 percent of the resulting $77.4 billion in tax cuts would go to households earning more than $200,000 a year, 50% to households earning more than $1 million. 

“During the debate over the [2017] tax bill, Sen. Paul fought to obtain the largest tax cuts possible for all Americans, and he continues to work to achieve even greater cuts,” a Paul spokesman said. “Despite his strong support for the overall tax bill, he disagreed with taking away existing deductions.”

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Economics, Finance and Investing