House Democrats are considering a five-year suspension of the cap on the federal state and local tax deduction before it's reinstated in 2026, according to people familiar with the negotiations, a plan that Senator Bernie Sanders quickly declared "unacceptable."
That temporary suspension has become the leading option in discussions about the SALT deduction limit. But the pushback from progressives like Sanders on extending the tax benefit to the ultra-wealthy likely will force proponents to reassess. His opposition is enough to block the bill in the Senate.
"I am open to a compromise approach which protects the middle class in high tax states," Sanders, a Vermont independent who caucuses with Democrats, said in a statement. "I will not support more tax breaks for billionaires."
Representative Pramila Jayapal of Washington, chair of the Congressional Progressive Caucus, said other members of the group also are "not happy" with the SALT proposal.
The SALT cap is one of several items still under negotiation for legislation to enact President Joe Biden's economic agenda that have been holding up drafting of text and a House vote. Lawmakers from the Northeast and other high-tax areas have been lobbying to suspend or significantly raise the cap and have threatened to withhold support for the overall package if it's not included.
The cap would be suspended for all taxpayers from 2021 to 2025 under the latest proposal, according to a Ways and Means Committee aide. The $10,000 cap would then be reinstated from 2026 to 2030, the person said.
Because the cap is currently scheduled to end in 2025, moving the restriction to a different five-year block within the 10-year budget window would let Democrats claim that the move doesn't add to the deficit. However, Democrats say they hope to repeal the cap completely by then, though there is no guarantee they'll have the majorities in Congress to do so.
"The cap on the SALT deduction remains a punishing blow to our home states of New York and New Jersey as we work to recover from the pandemic and get our economies on strong footing and our constituents back to work," Representatives Tom Suozzi of New York and Josh Gottheimer and Mikie Sherrill of New Jersey, all Democrats who advocated for expanding the write-off, said in joint statement. "We will continue to work with House and Senate leadership to ensure the cap on the SALT deduction is repealed."
Unless the cap is reinstated in five years, as the plan envisions, a repeal would cost roughly $475 billion, with $400 billion of the tax cut going to the top 5% of households, according to the Committee for a Responsible Federal Budget think tank, figures also cited by Sanders on Tuesday.
The talks over a five-year suspension of the cap were reported earlier by Punchbowl News.
