New York lawmakers threaten Biden's infrastructure tax hikes without local tax break

WASHINGTON (Reuters) - Seventeen New York state Democratic lawmakers on Tuesday said they will not support proposed tax increases to pay for President Joe Biden's infrastructure plan unless it also rolls back a 2017 tax change that hurt high earners in some states.

The group urged the full repeal of the provision, which limited to $10,000 the state and local taxes that households itemizing deductions could write off their federal returns.

Known as the SALT cap, it was part of the $1.5 trillion tax overhaul signed by President Donald Trump in 2017.

"We stand ready to work with you on this critical issue, and we will not hesitate to oppose any tax legislation that does not fully restore the SALT deduction," the group, led by Representatives Tom Suozzi and Jerry Nadler, wrote in a letter to House Democratic leadership.

Biden's party narrowly controls the House of Representatives and the Senate, meaning he can ill afford to lose such a large number of Democratic votes. His $2.3 trillion proposal to rebuild crumbling U.S. roads and bridges would be paid for by hiking the U.S. corporate tax rate to 28% from its current 21%.

Leading Democrats in Congress are sympathetic to the idea of repealing the SALT cap, which would benefit primarily people making over $100,000 a year in high-tax states like New York and California.

House Speaker Nancy Pelosi, of California, has expressed sympathy for repeal, while Senate Majority Leader Chuck Schumer, of New York, has co-sponsored legislation to eliminate the cap.

But the White House has said removing the cap is not part of the infrastructure proposal. White House spokeswoman Jen Psaki said recently that if Democrats want to eliminate the deduction - and propose a way to pay for it, "we're happy to hear their ideas."

Capping the SALT deduction helped pay for the Republicans' 2017 tax law, which lowered taxes for wealthy Americans and slashed the corporate tax rate. Republicans generally oppose restoring the deduction, which they view as largely benefiting Democratic voters.

(Reporting by Susan Cornwell; Editing by Dan Grebler)