SALT deduction relief may be in peril as Build Back Better stalls

• The Democrats' plan to increase the federal deduction for state and local taxes, known as SALT, may be in peril as Build Back Better stalls.
• Sen. Joe Manchin, D-W.Va., says he won’t vote for the bill, halting the current version of President Joe Biden's $1.75 trillion social and climate package.
• However, some policy experts say lawmakers may still revive the measure — including some version of SALT relief — early in 2022.

Rep. Judy Chu, D-Calif., speaks during a news conference announcing the State and Local Taxes (SALT) Caucus outside the U.S. Capitol.

Sarah Silbiger | Bloomberg | Getty Images

The Democrats' plan to increase the federal deduction for state and local taxes, known as SALT, may be in peril as Build Back Better stalls.

Sen. Joe Manchin, D-W.Va., on Sunday said he won't vote for Build Back Better, halting the current version of President Joe Biden's $1.75 trillion social and climate package.

Lawmakers need support from all 50 Democratic senators to bypass Republican opposition in the budget reconciliation process.

More from Personal Finance:
House Democrats want to raise SALT deduction cap to $80,000. What it means for your taxes
These states offer a workaround for the SALT deduction limit
House Democrats pass package with $80,000 SALT cap through 2030

And with SALT relief opposition from some Democrats, it may be difficult to pass the measure outside Build Back Better as a standalone bill.

However, some policy experts say Democrats may still revive the bill — including SALT cap relief — at the beginning of 2022.

"I may be kind of a wide-eyed optimist, but I still think there's a very good chance the Democrats will pass some version of Build Back Better early next year," said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.

I think they realize they have to provide something for House Democrats who represent wealthy, suburban districts.

Howard Gleckman

Senior fellow at the Urban-Brookings Tax Policy Center

But if Democrats rework the bill to slash social spending, they may reduce the proposed $80,000 SALT deduction limit, he said. 

"I think it will be scaled back," Gleckman said. "But I think they realize they have to provide something for those House Democrats who represent wealthy, suburban districts."

The Senate plans to vote on Build Back Better in January, despite pushback from Manchin. However, it's unclear if and how the bill may change in the meantime. 

"I am hopeful that we can find common ground to help lower prescription drug costs, cut taxes for middle-class families with SALT, invest in pre-K for children and accomplish other commonsense priorities," Rep. Josh Gottheimer, D-N.J., a long-time SALT relief advocate and co-chair of the Problem Solvers Caucus, said in a tweet.  

"I will do my part to help bring everyone back to the table," he said.