House and Senate Democrats on Wednesday floated proposals on the state and local tax (SALT) deduction that take different approaches amid efforts by the lawmakers to finalize their social spending package.
Both proposals stop short of fully repealing the $10,000 cap on the SALT deduction created by Republicans’ 2017 tax law, and are designed to not add to the deficit.
However, the two proposed measure otherwise have key differences.
The House Rules Committee released a new version of spending bill text that would raise the SALT deduction cap to $72,500, and keep that limit in place through 2031. The current cap is set to expire after 2025.
But Sens. Bernie Sanders (I-Vt.) and Bob Menendez (D-N.J.) criticized that approach, suggesting it would be too beneficial for high-income taxpayers.
Sanders, a leading progressive senator, said that raising the cap to $72,500 would be better than full repeal of the cap, which lawmakers had been considering on Tuesday. However, the House proposal “still is quite regressive.”
Sanders and Menendez said they were working on an alternative proposal, which would leave the cap at $10,000 but create an exemption for taxpayers with income under a level of around $400,000 to $550,000. They would make this a permanent policy.
Menendez said that this proposal would fully exempt 98 percent of New Jersey property taxpayers from the cap. New Jersey has high property taxes, and lawmakers in the state have been leaders in the effort to make changes to the SALT cap.
Menendez said he hopes to be able to work out differences with House Democrats.
“It’s time to get this done, and to get it done right,” he said.