Senators huddle on path forward for SALT deduction in spending bill

A group of Senate Democrats met Tuesday to discuss how to address the state and local tax (SALT) deduction in the social spending and climate package, seeking to make progress on a key issue where Democrats have yet to reach an agreement.

Senators said following the meeting that they did not come to a resolution on the issue but were nonetheless upbeat about the discussions.

Sen. Jon Tester (D-Mont.) said he thinks there is a “path forward.”

Sen. Bernie Sanders (I-Vt.) similarly told reporters it was a “good discussion.”

Republicans created a $10,000 cap on the SALT deduction in their 2017 tax law. The cap has long been disliked by lawmakers in high-tax states such as New York and New Jersey, who argue it punishes their states and residents. But some progressives, such as Sanders, as well as some moderate Democrats, such as Tester, have raised concerns that undoing the cap would amount to a tax cut for high-income households.

The House’s version of the social-spending bill would raise the cap from $10,000 to $80,000, but many senators have raised concerns about this approach, saying it would be too beneficial for the wealthy.

Sanders and Sen. Bob Menendez (D-N.J.) earlier this month floated an alternative idea under which the cap would remain at $10,000 but there would be an exemption for households under a certain income level. 

The two senators told reporters Monday that they had some disagreements over the details of a proposal. Sanders had expressed a desire for a proposal that would increase federal revenue, while Menendez wants the proposal to be revenue-neutral.

Menendez’s office emphasized a desire for changes to the SALT deduction cap to be revenue-neutral following Tuesday’s meeting.

“Today’s meeting was a positive step as Senator Menendez continues to work to end the SALT cap nightmare for 99% of NJ families,” a spokesman for Menendez said. “Any attempt to raise revenue from the SALT cap is a non-starter for the Senator as it doubles down on bad policy and makes New Jerseyans pay more than their fair share. As negotiations continue, a revenue neutral proposal on SALT is the only viable path forward.”