Sens. Bernie Sanders and Bob Menendez are hoping to mend intraparty disagreement about a key tax provision in the Democratic infrastructure and social spending plan.
The duo pitched a compromise to changing the structure of federal tax deductions for paid state and local taxes on Wednesday, a day after reports suggested that Democratic leadership was planning to remove the $10,000 SALT cap as part of the party’s major climate and social welfare reconciliation bill.
Sanders, a Vermont socialist, had raised concerns that doing so would provide huge tax breaks for millionaires in high-tax states. The proposal he introduced with Menendez, a New Jersey Democrat, would restore the SALT deduction only for people earning less than $400,000, a move that Sanders said was designed to “make sure the wealthy do not get a tax break.”
“We have heard for months and months and months from Democratic colleagues that we are sick and tired of seeing the wealthiest people in this country, including multibillionaires, who some years pay nothing in federal income taxes,” Sanders said. “The American people are disgusted with that … so if somebody comes up with a proposal that says, ‘Yeah, we’re going to give even more tax breaks to these people,’ it’s not a question of messaging. That is terrible, terrible policy.”
Sanders and Menendez contend that their proposal, which they intend to make permanent, would not add to the deficit.
The announcement came at just about the same time that the House took its own course of action on Wednesday and, instead of eliminating the cap as was discussed Tuesday, proposed raising the $10,000 cap to $72,500 across the board.
The Tax Foundation quickly released a distributional analysis that estimates the House proposal would benefit those earning between $250,000 and $1 million the most. Only 2.2% of taxpayers making between $50,000 and $75,000 would see a tax decrease under the plan, compared to 86% of those earning between $500,000 and $1 million, the group estimates.
Several blue-state House Democrats have threatened to oppose the larger reconciliation measure if it does not include SALT relief.
Most Republicans are vocally opposed to raising or eliminating the SALT cap and have argued that it is a hypocritical position for Democrats to take, given the benefits that it would provide to the wealthy.