California legislators are taking a milder tone about recovering tax cuts for Californians lost under Trump

At a community event on Oceanside on November 4, 2019, Speaker of the House Nancy Pelosi greeted supporters after speaking with Congressman Mike Levin.

Speaker of the House Nancy Pelosi greeted supporters after speaking with Congressman Mike Levin (D-San Juan Capistrano) at a 2019 community event on Oceanside. (KC Alfred / San Diego Union-Tribune)

Recognizing how that would affect Chairman Nancy Pelosi’s position in the negotiations, Democrats in California abolished the $ 10,000 cap set during the Trump administration on President Biden’s infrastructure package altogether. Do not draw the same red line as the East Coast colleagues requesting to include State and local tax deductions.

California, where taxpayers face higher property, local and state taxes than most other states, was one of the states that was hit hardest by the Republican caps set in 2017. I wonder why it doesn’t throw that weight behind the request to remove the cap.

In an interview, California Democrats acknowledged how the inability to deduct the full amount of state and local taxes, also known as SALT, affected middle and upper class residents in the district. He said he hopes the cap will be lifted. But they said it was too early to set a line on a particular policy, even though the law wasn’t written. It’s not yet clear whether the tax and infrastructure parts will be one invoice or two.

Democrat Anna Eshoo, who was the largest beneficiary of the deduction before the district in the Menlo Park area reached the cap, said removing it remained a priority, but she could draw a red line. I don’t think it’s the best strategy.

“It’s not my style. There’s a solid case that you can make. It can stand on its own,” Eshoo said.

For weeks, rumors that caps could be an issue in negotiations over how to pay for Biden’s ambitious infrastructure packages that Democrats and Senate leaders are aiming to pass this summer. had. A few Democrats in New York and New Jersey, two other hard-hit states, first said they wouldn’t support the bill without it.

On Tuesday, Democrats on the East Coast said 17 of 19 Democrats in New York Parliamentary Delegation We have informed Pelosi that we will not support the tax increase to fund Biden’s proposed infrastructure package unless the SALT cap is lifted.

“I think it’s another tactical approach. I think we all want this to happen. We’re not committed to it, but the ultimatum and the like get there the right way. Not everyone agrees with something, “said the person in charge. .. Jared Huffman (D-San Rafael). “I don’t think it’s constructive to start laying such an absolute red line.”

Both Pelosi (Democratic Party) and Senate Leader Charles E. Schumer (DN.Y.) Want to find a way to raise the bill’s cap.

“Hopefully we can put it in the bill,” Pelosi recently told reporters, calling Cap “catastrophic” and “nasty.”

The White House said it was open to the idea of ​​removing the cap, but it’s up to Congress to understand how to pay for it. With the removal of the cap, if Biden has already proposed a major tax reform to fund a larger infrastructure package to help recover from the economic impact of COVID-19, federal revenue Will decrease by nearly $ 80 billion annually.

Some California Democrats want to see the cap raised, but so far they have completely refused to vote on a tax bill that doesn’t raise the cap and joined East Coast colleagues. There is no one.

Rep. Ro Khanna (D-Fremont) said he was confident that House leaders would find a way to lift the cap on the final bill.

“We have a secret weapon. We have Nancy Pelosi. You don’t have to draw a line in the sand. You can talk to her,” Kanna said. “She knows it’s a problem, she believes it’s a problem, and we trust her judgment that she’s going to push this as hard as possible There is a level of trust in her that allows us to say, you know, we trust her judgment. “

Forty-one California Democrats have signed a letter written by Democrats. San Juan Capistrano’s Mike Levin and Irvine’s Katie Porter urge Biden to include the abolition of the SALT cap in his infrastructure bill, but they don’t say they oppose the overall package without it. ..

“The removal of this arbitrary cap is necessary and cautious in seeking remedies to help the American people during this recovery period,” the letter said.

The letter has a softer word than the New York delegation’s request, as Biden’s proposed infrastructure package is so important that it depends on whether it contains a single policy. Levin said.

“I don’t think it’s what I want to do to draw a line on any issue, including this one,” Levin said.

“The goal here is to emphasize why this is an important abolition of Trump’s tax reforms for the President and the American people,” Porter said.

Prior to the signing of the 2017 Tax Reduction and Employment Act, Americans have been able to deduct unlimited state and local property, income and sales taxes from their federal tax returns since 1913. Deduct tens of thousands of dollars from federal taxes. The average deduction for California was over $ 18,000. In some districts it was twice or three times that amount.

Calling it unfair interests for the wealthy, Republicans limit deductions to $ 10,000.. The cap will expire in 2025 unless Congress acts to make it permanent. Critics have accused it of a direct attack on high-tax taxpayers in coastal countries led by the Democratic Party.

Wealthy people see most of their profits, but in California, where housing prices and living costs are high, caps are felt wide.

“The important thing I understand is the reality of California. If you live in one of the coastal cities, earn a salary for the upper middle class, and own a home, those people are all affected by the cap. “I will receive it,” said Darien Shanske, a professor at the UC Davis School of Law.

SALT deductions are not capped 3 million of the more than 6.4 million Californians who claimed deductions in California last year in 2017 had adjusted gross revenues of less than $ 100,000. Another 2 million had adjusted gross revenue between $ 100,000 and $ 200,000.

By 2018, only 3.2 million Californians had claimed SALT deductions, according to the IRS. The biggest drop was among those with adjusted total income of less than $ 100,000 and 1.2 million Californians in the category claiming deductions.

The Democrats repeatedly tried to lift the cap when they gained control of the House of Representatives in 2018, Effort failed With the Senate and the White House managed by the Republican Party. But now the Democrats dominate the Senate and the White House, and the infrastructure bill is one of the few major laws expected to pass this parliament.

Infrastructure and tax bills require simple majority approval and are expected to be considered using a method called a non-filibuster settlement. This is the threshold that nonpartisans who tend to vote without Democratic and Republican support can reach.

California lawmakers are already considering workarounds if Congress does not lift or remove the cap that allows certain businesses to deduct state and local taxes on behalf of their owners.

Connecticut and Maryland have already approved similar workarounds without objection from the IRS. But Mr Shansuke said that Congress would only help a small proportion of those who would benefit from raising or removing the cap.

Rep. Pete Aguilar (D-Redlands) said he rarely heard members demanding that they be uncapped.

“Inland Empire’s assets are a bit different from Oceanside and Newport’s assets, so the sentiment of colleagues representing costly coastal areas is that their components may be affected a bit more. I understand, “says Aguilar.

Other California representatives said they didn’t want to lock themselves in a position without looking at the entire bill. Some said they might support raising the cap so that more middle-class Californians could qualify, but the wealthiest taxpayers did not. Others have said that the final infrastructure proposal may be attractive enough to elicit their support without dealing with state or local taxes at all.

“This is a priority, but I want to see the whole package before deciding whether to agree or disagree,” said Congressman Nanette Barragán (D-San Pedro).

Rep. Julia Brownley (D-Westlake Village) frequently listens to members who want to remove the cap and relies on property tax deductions when buying a home, but removing the cap. Believe to be part of the larger one. image.

“There’s a lot in the air,” Brownley said. “I think we need to be open.”

This story was originally Los Angeles Times..