What You Need to Know
- Sanders said those earning above the top limit could still claim up to $10,000, the current maximum deduction.
Senator Bernie Sanders said he is working on a proposal to set an income threshold for an unlimited state and local tax deduction while letting high earners continue to deduct $10,000 from their federal taxes as they can under current law.
“I am working with some of my colleagues to make sure that we come up with a proposal that protects the middle class, but does not end up with an overall reconciliation bill, in which millionaires are better off tax-wise than they were under Trump,” the Budget Committee chair told reporters Tuesday.
Sanders, a Vermont independent who caucuses with Democrats, said he is working on a plan that would give an unlimited deduction on federal returns for state and local taxes, or SALT, under a certain income level that is still being negotiated. Sanders has previously floated about $400,000 in annual income as the limit for unlimited SALT write-offs.
Senator Bob Menendez, a New Jersey Democrat who is also working on the proposal, said the lawmakers are looking at options that won’t add to the deficit. He said that they are still waiting for data from congressional scorekeepers, but that the income threshold could be as much as $500,000.
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Senators are aiming to set the threshold at a level as high as possible that still doesn’t add to the deficit, Menendez said.
“If the revenue note says it will be revenue neutral at $500,000, it will be $500,000,” he said, referring to the estimates from the Joint Committee on Taxation.
Sanders said that those earning above the top limit could still claim up to $10,000 in SALT, the maximum deduction currently permitted in the tax code. Sanders said the senators are still discussing how the phase out of the unlimited write-offs would work.
The politically important SALT break has become one of the most contentious fights among Democrats as they look to finalize legislation for President Joe Biden’s wide-ranging tax and social program.