Members of the bipartisan Problem Solvers Caucus have been the leading voices in Congress calling on their colleagues to pass tax legislation to benefit wealthy individuals who pay high levels of state and local taxes, and now some of its members are threatening to hold President Biden’s infrastructure package hostage unless the measure gets attached.
Prior to the tax reform bill signed into law by President Trump in 2017, taxpayers who itemize could deduct from their federal taxes any amount they paid in state and local taxes (SALT), including property taxes and income taxes. For wealthy individuals who live and work in high-tax states like California and New York, that deduction was substantial—equal to nearly 8% of adjusted gross income for people who earned more than $500,000 in 2016. But the Tax Cuts and Jobs Act of 2017 capped the federal SALT deduction at $10,000, which effectively raised tax bills for the wealthy. (Many other provisions of the bill had the effect of lower taxes for the same group.)
A bipartisan group of representatives led by New York Democrat Tom Suozzi is now playing hardball to get the SALT cap repealed and lower tax bills for their wealthiest constituents.
In January, Suozzi, the vice chair of the Problem Solvers Caucus, and six other members of the caucus introduced the SALT Deductibility Act to strike the cap on SALT deductions from the tax code. Last week, Suozzi drastically ramped up his efforts by threatening to block Biden’s infrastructure spending and tax package unless the tax cut for the rich is added. “No SALT, no deal,” Suozzi said in a statement.
He’s being joined in his threat by Problem Solvers Caucus Co-Chair Rep. Josh Gottheimer (D-N.J.) and Rep. Bill Pascrell (D-N.J.). With Democrats currently having a slim majority in the House with multiple vacant seats, if just two Democrats sided with Republicans on an otherwise party-line vote they could potentially block the infrastructure bill.
The Problem Solvers Caucus is a group of 52 House representatives, equally divided between Democrats and Republicans, that says its goal is to break congressional gridlock. Former member Rep. Mark Pocan (D-Wis.) went to a few meetings of the group and dropped out after determining it was “more about finding more centrist, more corporate and more special interest-focused things to do” than about breaking gridlock. It was founded by the organization No Labels, which is funded by many prominent finance industry executives and has ties to centrist political operative Mark Penn.
Biden’s package outline does not include a SALT cap repeal, but White House Press Secretary Jen Psaki said on Monday that it is now on the table. “There are some that are proposing, as you all know, SALT deductions and other areas that are not revenue raisers, so this will be all part of the discussion,” Psaki said at a press briefing.
Top income earners in states like New York, New Jersey, Connecticut, and California have been disproportionately impacted by the SALT cap because they often pay high property taxes on their multi-million dollar homes and the states have high income tax rates. A review of federal campaign finance records shows that Suozzi and other Problem Solvers Caucus members created multiple special fundraising vehicles in the most recent election cycle to take donations well above the legal maximum an individual can donate to a campaign from precisely this group of wealthy individuals.
The Problem Solvers Caucus set up four joint fundraising committees last cycle that took a total of more than $3.6 million in contributions of up to $99,600 nearly exclusively from corporate executives and their spouses and distributed the funds to the campaigns of Suozzi, Gottheimer and other member representatives. Several executives chipped in to more than one of the Problem Solvers’ joint fundraising committees, giving as much as $197,000.
The maximum amount a campaign could accept from an individual donor last election cycle was $5,600, but joint fundraising committees can accept much larger checks from donors because they represent multiple campaigns. The Problem Solvers’ joint fundraising committees exploit the Supreme Court’s 2014 ruling in McCutcheon v. FEC, which struck down aggregate campaign contribution limits and allowed for big donors to fund multiple candidates with a single large check.
Seventy-two percent of the donations to the Problem Solvers’ joint fundraising committees came from donors who reside in six high-SALT blue states: California, Connecticut, Illinois, Massachusetts, New Jersey, and New York.
Suozzi’s largest contributor last cycle besides the conduit service ActBlue was Problem Solvers Heroes, one of the caucus’ joint fundraising committees aligned with its Democratic members that also gave to Gottheimer and several other Democrats. Among its major donors were several high-SALT state corporate executives who otherwise only donate to Republicans.
Inverness, Illinois’ John Canning Jr., the chairman and co-founder of private equity firm Madison Dearborn Partners, gave $99,600 to Problem Solvers Heroes. It appears to be his only substantial federal donation to a Democratic entity, with his other donations last cycle being to McCarthy Victory Fund ($60,000), Scalise Victory Fund ($50,000), and McConnell Victory Committee ($50,000).
There are numerous other examples of big GOP donors from high-SALT states who gave to Problem Solvers Heroes. Craig Duchossois of Illinois, the executive chair of the Duchossois Group, gave Problem Solvers Heroes $98,600. His other donations last cycle went almost exclusively to Republican groups (the exception being Sen. Sinema), including nearly $7 million to the Mitch McConnell-aligned Senate Leadership Fund super PAC, $500,000 to Charles Koch’s Americans for Prosperity Action, and $250,000 to Security is Strength, which backed Sen. Lindsey Graham (R-S.C.). Another Problem Solvers Heroes donor was New York’s Russell Carson, co-founder and general partner of Welsh, Carson, Anderson & Stowe, who gave the group $75,000. Carson’s other large donations over the years have included $500,000 to Senate Leadership Fund, more than $500,000 to the National Republican Senatorial Committee, and $100,000 to the Team Ryan joint fundraising committee, though he has also made some much smaller contributions to Democrats, including $5,559.77 to Suozzi last cycle.
Another joint fundraising committee that funneled money to Gottheimer but not Suozzi was Problem Solver Democrats, which also took large donations from wealthy high-SALT state individuals. CVC Capital Partners Managing Partner Christopher Stadler of New Jersey gave the group $58,000, Chicago Trading Company CEO Dan Feuser and his wife combined to give the group $72,800, and California-based Fortress Investment Group Senior Advisor Timothy Sloan gave $28,000.
Repealing the SALT cap would cost the government approximately $80 billion per year and would give almost all of its benefits to the top 5% of income earners. The top 1% of earners would see their federal tax bill cut by an average of 2.79%, according to a model from the Tax Foundation.
The Brookings Institution concluded that lifting the SALT cap would be more distributionally favorable to the rich than the 2017 Trump tax bill was. While the 2017 bill gave 21% of its benefits to the top 1% of earners, Brookings concluded that lifting the SALT cap would give 57% of its benefit to that group. The think tank calls the SALT deduction “a handout to the rich” and argues that it should be eliminated rather than expanded as Suozzi is proposing.
The Problem Solvers are not the only members of Congress who would like to get rid of the SALT deduction cap. House Speaker Nancy Pelosi, of the high-SALT state of California, said last week that she is sympathetic towards Suozzi’s threat to block the infrastructure package without it, and Senate Majority Leader Chuck Schumer, of high-SALT New York, was the chief sponsor of the Senate version of Suozzi’s cap repeal bill in January.
Suozzi, Gottheimer, and Pelosi each have net worths estimated to be in the range of several millions of dollars and would almost certainly personally benefit from having the cap repealed. Gottheimer, for example, reports a mortgage of between $1 million and $5 million on his financial disclosure, and with New Jersey property taxes averaging 2.42%, he is likely losing out on a deduction of between $14,000 and $111,000 with the $10,000 cap in place based on just his property taxes.
In a tweet that was deleted after 8 hours but archived by ProPublica’s Politiwoops system, Suozzi attempted to tie the SALT deduction to “diversity.”
Suozzi’s office did not respond to a request for comment.