SALT Deduction Relief Included in Sanders Budget Proposal

Senate Budget Committee Chairman Bernie Sanders is proposing to partially revive the federal deduction for state and local taxes in an draft outline of a budget resolution designed to fast-track much of President Joe Biden’s economic agenda.

A draft of Sanders’s plans, obtained by Bloomberg, offers a side-by-side comparison of Biden’s agenda to the Vermont independent’s ideas, and includes long-standing goals for progressives on health care, prescription drugs and housing.

See the budget-comparison proposal here

The proposal doesn’t specify how the state and local tax, or SALT, write-off proposal would work. But it provides a template for how Democrats could reach agreement about how to address the tax break, that is a key priority for Democrats representing high-tax states, including New York and New Jersey.

Sanders in an interview said he and fellow Democrats are still working out the details of the SALT cap issue, but he indicated it would not be a full repeal for all taxpayers and wouldn’t include the wealthiest.

“Do I think billionaires should receive a tax break in that area? I don’t,” he said.

Biden did not address the SALT deduction in his American Jobs Plan or American Families plan, and White House Press Secretary Jen Psaki has said that it’s up to Congress to decide how to find offsets to pay for the more generous tax break.

Democrats have discussed several ways to provide limited SALT relief, including offering the full deduction for a couple of years, or setting income thresholds for who can claim the tax break. The $120 billion in Sanders’s plan isn’t enough funding to cover a permanent, full repeal of the $10,000 cap on the write-off.

Fully repealing the SALT cap would cost about $385 billion, according to an estimate of Representative Tom Suozzi’s bill to restore the tax break. That means Sanders’s proposal would cover less than one-third of a complete rollback of the SALT cap for all taxpayers.

Suozzi is among more than 20 House Democrats who have threatened to withhold their support for Biden’s broader economic agenda until SALT is included in the plans. But some progressives, including New York Representative Alexandria Ocasio-Cortez, have criticized the deduction as primarily a benefit for the wealthy. Republicans also oppose lifting the deduction cap, which was set in their 2017 tax bill.

In all, the Sanders proposal calls for nearly $6 trillion in spending, compared with what it says is $4.4 trillion proposed by Biden. CQ Roll Call earlier reported about the document.

Senate Democrats plan to vote on a budget in July setting up a fast-track process to pass Biden’s agenda in the fall by bypassing a Republican filibuster. Some moderate Democrats are already balking at the $6 trillion price tag and fact it would add trillions to the deficit, both of which Sanders confirmed last week.

The plan also includes dozens of other spending line items, including nearly $300 billion to expand dental, vision and hearing for Medicare and $200 billion to lower the lower the Medicare eligibility age to 60 from 65. Neither was included in Biden’s proposal, but have broad support from Democrats.

The additional health-care costs would be offset by negotiating for lower Medicare drug prices. The proposal also calls for $560 billion for affordable housing, about $331 billion more than the Biden plan.

The Sanders proposal also calls for some targeted immigration measures also excluded from White House plans: funding for Dreamers, agriculture workers, temporary protected status and other “essential workers.”

The Sanders plan calls for adding the pro-union Protecting the Right to Organize, or PRO Act, to the bill using the partisan reconciliation process. The bill passed the House earlier this year, but it’s unclear if the legislation meets the Senate rules requirements to pass on a simple majority vote.

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