As Democrats on Capitol Hill plow ahead with the second part of the president’s massive domestic agenda, an internal dispute has erupted over the future of the cap on the federal deduction for state and local taxes.

Many New Yorkers are keeping up the pressure, demanding the final version of President Joe Biden’s Build Back Better bill raise the limit on the so-called SALT deduction.

But it remains unclear what changes to the cap the Democratic coalition on Capitol Hill will unite behind.

What You Need To Know

  • President Trump and Republicans capped the amount of state and local taxes that households could deduct from their federal taxes at $10,000 - a change that disproportionately impacted high tax states like New York

  • Many New York lawmakers are keeping up the pressure, demanding the final version of President Joe Biden’s social spending bill lift the cap

  • The House version of the Build Back Better Act calls for lifting the cap to $80,000
  • Sen. Bernie Sanders calls the House plan "bad politics" and is offering an alternative proposal

In 2017, President Donald Trump and Republicans capped the amount of state and local taxes that households could deduct from their federal taxes at $10,000. The provision disproportionately affected high tax states like New York.

“The cap at $10,000 was a real body blow for most families,” Rep. Tom Suozzi said.

Hudson Valley Congressman Antonio Delgado has secured a letter from Biden, in which the president wrote that he is “committed to continuing our work together to deliver on this."

“This is a true unadulterated tax cut for people all across my district and across the state of New York,” Delgado said of raising the SALT cap.

The House version of the Build Back Better Act calls for lifting the cap to $80,000. 

But that plan is facing criticism from within the Democratic coalition, in part because of the projected impact of the bill. The left-leaning Tax Policy Center estimates that under that proposal, 70 percent of the benefit would go to tax filers making at least $365,000 a year.

“It’s bad politics, it’s bad policy,” Vermont Sen. Bernie Sanders said Thursday. “We’ve got to demand that the wealthy start paying their fair share of taxes, not give them more tax breaks.”

Sanders has offered an alternative, exempting tax filers making under $400,000 annually from the cap. The finer details are still being worked out.

Bronx Rep. Alexandria Ocasio-Cortez, who has argued that any changes to SALT should not result in giving tax cuts to the rich, calls the $80,000 cap “too high.” She labeled Sanders' pitch a “fine proposal.”

Republicans put the SALT cap in place to help fund their 2017 tax cuts — a law that Democrats have long skewered as helping the wealthy.

As Democrats try to raise the deduction cap, Republicans are turning the tables.

“Your child tax credit is for one year, but your tax break for millionaires is for 10?” Rep. Jason Smith of Missouri said debate on the House floor.

Suozzi, who has threatened to not vote for the social spending bill without action on SALT, stands by the House plan and is pushing back on criticism of easing the cap.

“What’s middle class to us [in New York] is different than what it is in other places in the country. So we need this for our residents,” he said.

Whatever passes the House is not a done deal. The Senate, too, needs to weigh in. In that chamber, because of the razor thin margins, each senator effectively has veto power on the final plan.