On October 26, the U.S. House of Representatives passed the Senate’s budget resolution on a 216 to 212 vote. This vote follows the Senate passing the same budget resolution 51 to 49 the previous week. The approved budget resolution unlocks a crucial step for comprehensive tax reform efforts and will allow the Senate to pass a final bill with only a simple majority. However, the budget also explicitly calls for an elimination of the state and local tax (SALT) deduction to offset other costs associated with tax reform.
Disagreements over the SALT deduction took center stage during the budget debate and could present a major roadblock for tax reform efforts. House leadership worked with a group of Republican lawmakers expressing concerns on the issue, encouraging them to pass the budget resolution as a next step in the tax reform process. However, though the budget measure passed, 20 House Republicans still voted against it. If all Democrats vote together, House leadership cannot lose more than 22 Republican votes on a bill or it will fail.
Following the vote, House Ways and Means Chairman Kevin Brady (R-Texas) has continued working with lawmakers concerned about eliminating the SALT deduction. In fact, on October 28, Brady announced the tax reform framework will retain an itemized deduction for property taxes, which make up about a third of the taxes deducted through SALT. On the same day, the National Association of Home Builders announced they will withdraw their support for the tax reform package given potential negative impacts on the housing market.
While an exact timeline remains uncertain, legislative text is expected on November 1, though some details may still need to be filled in. Following the release of legislation, the House Ways and Means Committee would likely mark up the legislative text the following week, and House leadership plans to pass the bill through the House before the Thanksgiving recess. Next steps in the Senate also remain uncertain, though the administration hopes to sign a final bill before the end of the year.
Tax reform could significantly impact counties, especially if the SALT deduction is eliminated. Full or partial elimination of SALT would represent double taxation on American taxpayers. Additionally, by eliminating SALT, Congress would limit state and local control of our tax systems and force state and local governments to make specific taxing decisions. States and local governments deploy revenues from state and local property, income and sales taxes to finance infrastructure projects, local law enforcement, emergency services, education costs and many other services, all of which could be threatened by an elimination of SALT.
NACo will continue monitoring tax reform efforts and advocate for key county priorities, including the SALT deduction, as the process moves forward.
For more information, please reach out to Jack Peterson, NACo Associate Legislative Director, at email@example.com or (202) 661-8805.
Additional NACo & Americans Against Double Taxation Resources (AADT):
- Click here to view county-by-county SALT profiles.
- Click here to view state-by-state SALT profiles.
- Click here to view our SALT one-pager.
- Click here to view a Myths-vs.-Facts sheet on SALT
- Click here to read more about tax reform.
- Click here to view AADT’s resource page, and here to view a tax impact calculator