The leading New Jersey concern regarding the Biden-proposed Build Back Better legislation is whether the bill will include a major restoration of the federal income tax deduction for state and local tax (SALT) payments. These deductions were capped at $10,000.00 per year in 2017 under the Trump-sponsored Tax Cuts and Jobs Act.
The cap has had a more damaging impact in New Jersey than in other states, given the high rate of property taxes and home values in the Garden State, coupled with the state income tax burden as well. Now that the Democrats are in control of both houses of the Congress, New Jersey voters are holding them responsible for the abrogation of the cap or at least a major cap increase.
Mainstream Democrats are advocating for substantial cap relief, while progressive Democrats oppose any, contending that such an abrogation or increase of the cap would disproportionately benefit wealthier tax payers.
The focus of this intra-party Democratic debate is now in the US Senate, where the protagonist Senators are New Jersey’s own Bob Menendez, arguing for cap relief, and Vermont’s Bernie Sanders, opposing any measure that would substantially increase the cap.
It is a definite that no Republican will vote for the Build Back Better package, whether or not it includes SALT deduction restoration. Therefore, the vote of every Democratic Senator is needed to pass Build Back Better.
For Bernie Sanders, the issue is one of ideological purity. If the SALT deductions are restored, in whole or in part, with Bernie’s support, the Democrat Progressives may not continue to regard Sanders as Saint Bernard, the Fount of Ideological Purity.
For Bob Menendez, the issue is existential. Four New Jersey seats in the US House of Representatives currently held by Democrats would be at risk of flipping to the Republicans if the SALT cap is not either abolished or substantially increased: Third District, Andy Kim; Fifth District, Josh Gottheimer; Seventh District, Tom Malinowski; and Eleventh District, Mikie Sherrill.
All four of these districts were carried by Republican Jack Ciattarelli over incumbent Democratic Governor Phil Murphy in the 2021 New Jersey Gubernatorial election. That is a serious warning signal to each of the four aforementioned Democratic incumbents. A quick capsule look at each such competitive District is in order at this point. This outlook does not take into account changes that may be effected by redistricting.
Incumbent Andy Kim is likely to face a serious challenge in 2022, regardless of the ultimate resolution of the SALT issue.
He is popular among the Democrats in his district, but highly vulnerable to a challenge among the Republicans and Independents, who comprise over 60 percent of the district’s voters.
On top of that, Kim faces a formidable challenge from the likely GOP nominee, Robert Healey, Jr., a man with substantial experience in both the business and philanthropic arenas.
The Republican challenger will also benefit from efficient GOP organizations in the two counties within the district, Burlington and Ocean. Each of these Republican organizations has a leader considered to be among the most effective Republican chairs in New Jersey, Sean Earlen in Burlington and Frank Holman III in Ocean. Each had a most successful 2021 general election season. Earlen played a critical role in the Eighth District State Senate victory of Jean Stanfield and her Assembly running mates, and Holman was the driving force in the GOP ground game that gave Jack Ciattarelli a landslide 68 percent to 32 percent Ocean County victory.
Nevertheless, all things considered, Kim has to be rated a slight reelection favorite, although not unbeatable. If the SALT cap issue is not resolved to the satisfaction of his constituents, the odds of his winning another Congressional term in 2022 are no better than even money. It must be noted that 2021 redistricting could play a role in Kim’s reelection bid as South Jersey Democrats currently involved in the process have prioritized shoring up their Third District Congressman with towns currently in the 2nd District occupied by U.S. Rep. Jeff Van Drew (R-2).
The conventional wisdom of the media holds that Josh Gottheimer is an odds-on favorite for reelection. The conventional wisdom in this case isn’t very wise.
To begin. with, the Fifth District is hardly a bastion of the centrist politics of which Gottheimer is an avid practitioner. The pundits seem to have forgotten completely that from 2003 until 2017, this district was represented by ultra-conservative Scott Garrett.
The major factor auguring well for a Gottheimer reelection is his fundraising. In fact, Josh Gottheimer will have one of the best funded reelection campaigns in the nation.
Gottheimer’s electoral support in the Fifth District, however, is definitely on the soft side. Voters on both the progressive left and the conservative right have a high level of mistrust for him. This softness was reflected in a poll taken by Lake Research Partners for progressive groups.
Gottheimer will also likely face a worthy opponent in the putative Republican nominee, Nick DeGregorio, a candidate with solid academic, military, and business credentials.
Gottheimer’s fundraising gives him an advantage over any opponent as they approach the starting gate. A failure to resolve the SALT issue, however, could have a catastrophic impact on his reelection chances. Week after week, he appeared constantly, throughout the past four years, in all the various New Jersey and national media, anointing himself as the champion of SALT deduction restoration. If this issue is not satisfactorily resolved, this would be viewed by all political and private interest groups, left, center, and right as Gottheimer’s failure. In terms of his reelection chances, this could put Josh Gottheimer on the political endangered species list.
The odds are excellent that Tom Kean, Jr. will, on his fourth federal election try, finally achieve election to the United States House of Representatives, ousting incumbent Democratic Congressman Congressman Tom Malinowski, who is also beset with a raft of charges regarding his failure to account for his dealings in stocks.
If the issue of SALT deduction restoration is not satisfactorily resolved, Malinowski’s defeat is a certainty.
Incumbent Congresswoman Mikie Sherrill invested significant political capital in the fight to restore the SALT deductions. She will suffer a loss of political credibility and prestige if no substantial restoration occurs.
Mikie would survive this legislative defeat and still be reelected, due to her enormous personal appeal, and with the potential addition to her district of half of Montclair, a progressive bastion. A legislative defeat of this nature would, however, negatively affect her chances of winning a New Jersey Democratic gubernatorial primary in 2025 if she would choose to make the run.
Bob Menendez has to consider not only his own future but that of the aforesaid four incumbent Democratic members of the House of Representatives as well. When Menendez says he will not vote for the Build Back Better legislation unless substantial relief from the SALT cap is included, he is totally serious. He would be at major risk of defeat in his 2024 Senate reelection campaign if he voted for any such legislation that did not contain meaningful SALT deduction restoration.
The same is not true of Bernie Sanders. His seat is not at risk in his reelection year of 2024, regardless of what position he takes on SALT.
If SALT relief is not included in the Build Back Better package, Menendez will refuse to vote for the legislation, and Senate Democratic Leader Chuck Schumer will not have the 50 votes necessary for passage.
Schumer knows that there are other facets of the legislation that constitute substantial policy gains for Sanders and progressives. For this reason, Sanders and other Senate progressives are being pressured by the White House and Senate Democratic leadership to reach a settlement agreement with Menendez. Such a compromise could include a “circuit breaker,” limiting the benefits a very wealthy taxpayer could receive from any SALT deduction restoration.
Thus far, negotiations between Menendez and Sanders have foundered on the issue of what constitutes a wealthy taxpayer. Menendez favors eliminating the cap for individuals earning about $550,000 or less and married couples making around twice that. Sanders advocates eliminating the cap for those making less than $400,000. Intense White House intervention may be necessary to resolve this impasse.
Politics is said to be the art of compromise. Skilled practitioners of this art, including staff members of the Democratic Senate Caucus and the White House will be very much needed to resolve the Intra-Democratic Party SALT Conflict.
As I have said previously about all these intra-Democratic disputes: Where is LBJ, the greatest Democratic dealmaker of all time, now that today’s Democrats need him?
Alan J. Steinberg served as regional administrator of Region 2 EPA during the administration of former President George W. Bush and as executive director of the New Jersey Meadowlands Commission.