WASHINGTON — Senate Democrats are at an impasse on how to address the current $10,000 cap on deducting state and local taxes, leaving a meeting Tuesday without consensus on how to handle the issue in their $2.2 trillion budget reconciliation bill.
“SALT” deduction proponent Sen. Bob Menendez, D-N.J., and critic Sen. Bernie Sanders, I-Vt., have been working on a plan to extend the cap past its 2025 expiration and add an income-based exemption. But their efforts hit a snag this week over disagreement on the income level at which limits should begin, and over whether it should generate revenue to fund other priorities in the social safety net and climate package.
Menendez and Sanders held a press conference weeks ago to announce they’d be working on an income-based SALT cap as an alternative to the plan that passed the House, which would raise the cap to $80,000 beginning retroactively in the 2021 tax year and extend it until it returned to $10,000 in 2031. That would generate nearly $15 billion in revenue, in comparison to earlier proposals that would have added to the bill’s cost after pressure to trim the package from Senate centrists.
Menendez said Monday the Joint Committee on Taxation found that an income-based exemption that began phasing out at $550,000 of earnings for an individual and “a little less than double” that for married couples filing jointly would be revenue neutral. He’d previously called for a threshold around $550,000, saying it would cover nearly all New Jersey taxpayers.
Sanders told reporters he wanted the phaseout to begin at $400,000 of income, which he said Monday would raise a couple hundred billion dollars he hoped would pay for expanding Medicare benefits.
The two senators met in Senate Majority Leader Charles E. Schumer’s office Tuesday afternoon with fellow Senate Democrats including Michael Bennet of Colorado, Jon Tester of Montana, Elizabeth Warren of Massachusetts, Jeff Merkley of Oregon, Jon Ossoff of Georgia and Maine independent Angus King, most of whom have said they prefer the income-based plan to the $80,000 cap now in the bill.
Lawmakers leaving the meeting described it as productive, but bringing no final agreement on the issue.
“It was a good discussion,” Sanders said. “I think we’re making some progress.”
A Menendez spokesman called the meeting “a positive step” but said a revenue-generating approach would lose support from his boss.
“Any attempt to raise revenue from the SALT cap is a nonstarter for the senator as it doubles down on bad policy and makes New Jerseyans pay more than their fair share,” the spokesman said. “As negotiations continue, a revenue neutral proposal on SALT is the only viable path forward.”