New $1.75T spending plan would lift $10K SALT cap for 5 years

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A new iteration of President Joe Biden’s $1.75 trillion spending plan would include a temporary reprieve for the $10,000 limit on state and local property tax deductions, according to multiple media reports.

The $10,000 SALT cap was enacted as part of the 2017 Republican-backed federal tax cuts, and heavily panned by Democrats in high-tax states like New York and New Jersey, who said the limit was crafted to target them specifically.

Under the proposed congressional deal, the $10,000 limit would be lifted through 2025, according to The Hill and NJ Advance Media.

“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,” reads a joint statement issued Tuesday from New Jersey U.S. Reps. Josh Gottheimer and Mikie Sherrill, both Democrats, and U.S. Rep. Tom Suozzi, also a Democrat, from New York.

“Today’s news is encouraging for a SALT cap repeal to be included in the final reconciliation package,” the statement continues.

The news was panned by U.S. Sen. Bernie Sanders, an independent and one of the more progressive members of Congress’s upper house, who stumped for Gov. Phil Murphy’s reelection campaign in New Brunswick last week.

“This is beyond unacceptable,” Sanders tweeted Tuesday afternoon. “At a time of massive income and wealth inequality, the last thing we should be doing is giving more tax breaks to the very rich.”

Murphy, who also hosted Biden in New Jersey last week to promote the president’s proposed infrastructure package, said that any spending bill absolutely must include a repeal of the SALT cap.

“I look forward to working with our congressional delegation to ensure the final bill also includes SALT deduction cap relief,” the governor said in a statement last week, essentially going against Sanders, who endorsed him.

An April letter from Murphy and six other Democratic governors estimated that the cap has cost New Jerseyans an added $3 billion in annual taxes. A law the governor signed last year is meant to soften the blow of the $10,000 cap by shifting the timing for when many businesses file their taxes.

“The SALT deduction cap was the largest tax hike on middle class families in our state’s history, and I will not stop fighting until New Jersey gets the relief we deserve,” Murphy said.

The spending proposal includes hundreds of billions of dollars each for climate change and clean energy initiatives, expanded child care and pre-school, and other top social safety net agenda items.

The pared down version of the bill was aimed at attracting the support of Sen. Joe Manchin from West Virginia, arguably the upper chamber’s most conservative Democrat.

With the party only having 50 seats, it needs every single vote to push the bill forward. Democrats hope to tie the spending bill with a vote on the $1 trillion infrastructure package, which could include funding for the long-stalled Hudson River replacement tunnels.