WASHINGTON — The House voted on Thursday to temporarily eliminate a tax increase on some high-earning residents of states like California and New York that was included in President Trump’s 2017 tax overhaul, with some Republicans joining Democrats in support.
The bill would repeal a cap on a popular tax break that prevented taxpayers from deducting more than $10,000 in state and local taxes from their federal income taxes. It paired that repeal — which would in effect be a tax cut for upper earners in high-tax states — with an increase on the highest earners across the country by raising the top income tax rate to 39.6 percent from 37 percent.
In a procedural twist, Democrats agreed to a Republican amendment that would limit the bill’s benefits for blue-state billionaires. It would maintain the so-called SALT cap on deductions for taxpayers earning more than $100 million per year, and direct the saved money to a $500 tax break for teachers and first responders. Representative Mike Thompson, Democrat of California, said the motion was accepted “in the spirit of the holiday season.”
The bill, which was approved by a vote of 218 to 206, has no chance of passing the Republican-controlled Senate, and Mr. Trump has threatened to veto it.
But it was hailed as a victory by its Democratic champions, many of whom were elected last year in wealthy, suburban areas where the SALT cap had raised some voters’ taxes.
“It’s about fairness,” Representative Thomas Suozzi, Democrat of New York and the lead sponsor of the legislation, said in an interview. “Do we want people moving away from New York to go to Florida because they lost their state and local tax deduction?”
When those residents move out of state, Mr. Suozzi said, “the remaining lower- and middle-income families are left holding the bag.”
The 2017 Trump tax law limited deductions for state and local taxes paid, like income and property taxes, to $10,000 per household per year. That resulted in net tax increases for a slice of high-earning residents of areas with high income or property taxes, which tend to be concentrated in large metropolitan areas like New York City and high-tax states like New Jersey and California.
The SALT cap was tucked into the 2017 tax overhaul in part to help finance it and reduce its impact on the deficit. The bill passed on Thursday includes some budgetary gymnastics in order to avoid adding to the federal debt. It would repeal the SALT cap for three years while raising the top income tax rate for six years. Because of how Republicans structured the 2017 law, the SALT cap is set to expire and the top rate is set to rise on their own at the end of 2025.
Voter anger toward the SALT cap in certain areas appears to have helped lift Democrats in the 2018 midterms. In the months leading up to the election, the online research platform SurveyMonkey interviewed nearly 30,000 registered voters about their opinions on the tax law, their voting intentions and other topics. A New York Times analysis of that data suggests that the SALT cap may have had a significant effect on voters’ views of the tax law — and perhaps even on how they voted — to a degree that could have influenced the narrowest races in those districts.
Efforts to repeal the cap have emerged as a division among Democrats who have long criticized Republicans for cutting taxes to favor the rich.
Many liberal policy analysts oppose raising the SALT cap, because it would mostly benefit high earners and they would rather use the money for spending programs to help the poor and middle class.
Repealing the cap “should not be a top priority,” Seth Hanlon, a senior fellow at the liberal Center for American Progress, wrote in an online column this month.
“If policymakers are concerned with the effect of the SALT cap on middle-class families,” he wrote, “there are options to address it without providing enormous windfalls for the wealthy.”
At least one leading presidential contender, former Vice President Joseph R. Biden Jr., favors eliminating the cap.
“This bill truly is a tax cut for the few,” said Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee. “What Democrats are proposing today is regressive.”
Mr. Suozzi said on Thursday that the repeal of the cap would be “100 percent paid for by the wealthiest Americans,” by raising the top income tax rate.
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