SALT tax cap tests power of Long Island Republican delegation

WASHINGTON — During a long flight in April for a congressional visit to Israel, Rep. Nick LaLota pushed a shaker of salt six or seven times across a table toward House Speaker Kevin McCarthy until McCarthy finally asked, “Are you messing with me, Nick?”

LaLota replied, “Yes, Mr. Speaker. I want to make sure SALT is always on your mind.”

LaLota, a Republican from Amityville, tells that story to illustrate how he and other Republicans have been pushing House GOP leaders to modify the $10,000 limit on state and local tax deductions — also known as SALT.

Long Island Republicans form a core within the bipartisan SALT caucus. Rep. Andrew Garbarino (R-Bayport) serves as co-chair, and LaLota and Rep. Anthony D’Esposito (R-Island Park) have become some of the group’s most vocal members.

This summer, the SALT caucus flexed its muscle and stymied a pending House vote on a tax package that House Ways and Means Chairman Jason Smith (R-Montana) pushed through his committee with no SALT fix and after rejecting an amendment to modify the cap.

“I don’t think they have the votes without having some sort of SALT fix,” Garbarino said. LaLota estimated that five to 10 Republicans could vote against the package in the slim House Republican majority that can afford to lose only four votes.

Political analysts said they're skeptical the SALT cap will be addressed before it expires in 2025. 

D’Esposito said House leaders know the issue could put their majority in jeopardy in the 2024 election. Of the dozen Republican House races deemed toss-ups, four are in New York and four are in New Jersey and California — three of the states most affected by SALT.

“It is no secret that the majority in the House of Representatives for the 118th Congress ran right through New York,” D’Esposito said. “They understand how important this issue is and what it means to our future and of us all returning.”

GOP’s turn

In 2017, House Republicans wrote and passed the sweeping tax overhaul that cut the top tax rate for individuals from 39.6% to 37% — and paid for it by capping at $10,000 for the first time in 150 years the deduction for taxes levied by state and local governments.

The SALT cap has had its biggest impact on New York, New Jersey and California, as well as other high-tax states with a majority of Democratic voters. Many Democrats in Congress complained that Republicans took aim at the SALT tax to penalize Democratic states.

That tax bill drew 12 Republican no votes — five of them from New York Republicans.

Many Republicans and some liberal Democrats say the federal tax deductions for state and local taxes are mostly a boon to the wealthy. Backers of the deduction say it helps many middle income families in New York and other states with high taxes and a high cost of living.

In the next two sessions of Congress, Democrats controlled the House and passed legislation to repeal or increase the SALT cap, only to see it die in the Senate.

“We've passed it — with work I've done to help get it out of the House — four times, only for it to languish in the Senate, largely driven by the red states sticking it to us,” said Rep. Josh Gottheimer (D-New Jersey), a co-chair of the SALT caucus.    

A deal is possible, he added. “It depends what the total package is," Gottheimer said. "If you put a package together, and that in totality is a good package, then maybe it could get the votes.”

For now, he said, it’s up to Republicans in the SALT caucus to win a fix — or at least avoid an extension of the SALT cap when it expires in 2025. 

Talks ongoing

Garbarino, LaLota and D’Esposito said they have been very vocal about the need to pass a SALT fix in news conferences and in conversations with McCarthy, a Republican whose home state of California is feeling the SALT pinch, and other House Republican leaders.

“I think it's helped keep the issue at the top of people's minds. I think our insistence that increasing the cap be included in the bill is the reason why the bill has not moved to the floor yet,” Garbarino said about the tax package. “People know that we're serious.” 

LaLota said he routinely speaks to McCarthy about the cap. “In fact, I spoke with him a couple of days ago about this,” he said.

LaLota said Smith, chairman of the Ways and Means Committee, invited New York Republicans into his office — a “glamorous power room” off the House floor furnished with brass fixtures and 120-year-old paintings that might sway some, but not “proud and stubborn New Yorkers.”

LaLota added, “It's fair to say that the Ways and Means chairman was not pleased at our insistence to oppose our own party's tax bill, until and unless some sort of reasonable accommodation on SALT is included." 

Neither McCarthy nor Smith responded to Newsday queries for this article. 

Garbarino said he doesn’t think the bill will move to the House floor without some accommodation for modifying the SALT cap.

“We’re continuing negotiations with Ways and Means Committee staff about finding a SALT fix to be included in the tax package that they moved out of committee,” he said.

At the end of a Ways and Means meeting in June that advanced the tax package, Smith acknowledged he must do something about the demands for a SALT fix by New York Republicans, whose names he ticked off. 

“I hear from them, and I get salt shakers every time I see them,” Smith said. “So, I will tell you that it's just something we have to look at. And I don't know the answer, but we definitely need to have the discussion to see what is fair.”

SALT status quo?

At least a half-dozen bills to end or modify the SALT cap have been filed since this session in Congress began in January.

Garbarino and Gottheimer proposed a bill to repeal the cap from 2018 until 2025, with 50 co-sponsors that included seven Republicans. LaLota’s bill would raise the cap to $60,000 for an individual and $120,000 for a married couple, adjust for inflation and extend it through 2032. D’Esposito is a co-sponsor of both bills.

But all of those appear to be long shots.

“I believe, in the end, this debate must wait until the 2017 tax provisions expire in 2025 before it is resolved — if then,” said G. William Hoagland, a senior vice president at the Bipartisan Policy Center and a former Republican Senate staffer for budget and appropriations.

Jim Kessler, executive vice president for policy for Third Way, a moderate Democratic-aligned advocacy group, said a repeal or modification of the SALT cap seems unlikely during this session of Congress. 

“Too much of the Republican House has no interest in amending SALT, and any tinkering with the Trump tax plan is dead on arrival in the Senate,” he said. “The SALT cap disappears after 2025, so the next tax package in the forthcoming Congress will have to deal with it then.”

Even if the House passes Smith’s tax package somehow without the SALT caucus votes, Senate Majority Leader Chuck Schumer (D-New York) likely would not bring it to the floor because it reverses some of the Democrats' tax policies. 

Garbarino said he knows that the status quo for the SALT cap is a possibility.

“We'd like to increase it from $10,000 to something more now,” he said.

But he pointed out that the unlimited deductions for state and local taxes from the past are also on the horizon.

“It's coming back in 2025,” Garbarino said. “So, you know, time is on our side here.”