Democrats, including Bernie Sanders, fight for “tax cut for the rich” from SALT deductions

President Biden’s $ 1.8 trillion Build Back Better bill promises to expand the social safety net for the poor, but its most expensive provision is a tax cut for the rich, leaving divisions among Democrats.

As many Democrats celebrated Friday’s passage of the landmark bill, which is now heading to the Senate, where the controversial state and local tax, or SALT as it’s called, the deduction cap could be exceeded .

In the bill’s current form, taxpayers could deduct up to $ 80,000 in state and local taxes from their federal tax bill, up from the $ 10,000 cap put in place under the Trump’s 2017 tax cuts.

Trump instituted the SALT cap, which disproportionately targets wealthy people in high-tax states, as a way to offset other tax cuts in the 2017 bill. Other tax cuts initiated by Trump will not be not canceled, meaning many high earners could have an even lower tax bill under Biden than under Trump.

The proposal was not included in Biden’s original proposal, but was added later after a group of moderates from high-tax states like New York and New Jersey, Reps Bill Pascrell, NJ, Tom Suozzi, NY, Josh Gottheimer, NJ and Mikie Sherrill, NY

Other proposals that could be rejected in the final bill are a plan to give undocumented migrants who entered the country before 2011 the opportunity to apply for renewable work permits and four weeks of paid family leave, which the Moderate Democratic Senator Joe Manchin put it aside. water on it.

Representative Jared Golden, in Maine, became the only Democratic defector on the bill

Democratic Socialist Senator Bernie Sanders said of the SALT plan:

Democratic Socialist Senator Bernie Sanders said of the SALT plan: “This is bad policy, this is bad policy”

Representative Josh Gottheimer, DN.J., led a group of Coastal Democrats in threatening to block the Build Back Better plan if it did not include raising the SALT cap

Representative Josh Gottheimer, DN.J., led a group of Coastal Democrats in threatening to block the Build Back Better plan if it did not include raising the SALT cap

And while most progressives in the House voted for the bill’s tax cut, Representative Jared Golden in Maine remained the sole Democratic defector on the bill.

“The current version of SALT by House gives millionaires thousands of dollars in cash, while people who earn less than about $ 100,000 / year receive less than $ 20 on average. This policy costs $ 286 billion. Why would we do this? ‘ Golden said in a tweet, where he also argued for a billionaires capital gains tax.

Golden, set for a controversial re-election battle next year, said in a tweet on Wednesday that it appeared “Republicans were in the driver’s seat.”

“The fact that more people and organizations on the Democratic side are not speaking out about this is nonsense,” he wrote.

According to the non-partisan Tax Policy Center (TPC), middle-income households would get an average tax break of $ 20, as only 10% of all tax filers even itemize their deductions.

According to the Non-partisan Committee for a Responsible Federal Budget (CRFB), about 98% of the benefits of the increase would go to those earning more than $ 100,000 a year, and more than 80% to those earning more than $ 200,000. .

House Speaker Nancy Pelosi, whose wealthy San Francisco constituency is set to win big by raising the cap, has vowed to “fight” to make sure the SALT proposal stays in the final bill on Thursday.

“As a supporter of this particular measure of the bill, it is not about tax cuts for the rich,” Pelosi, D-Calif., Told reporters at his weekly press conference. “These are services for the American people. ”

After the bill was passed, she said, “We’ll see where we need to, shall we say, reconcile our differences, but at the end of the day we’ll have a great bill.”

Democratic Socialist Senator Bernie Sanders said of the SALT plan: “This is bad policy, this is bad policy.”

“Democrats campaigned on the premise that in the midst of massive income and wealth inequalities, we must demand that the rich start paying their fair share, not give them more breaks,” he said. he declared.

Sanders is working out a plan with New Jersey Senator Bob Menendez that, instead of raising the cap, exempts those earning $ 400,000 or less from the current cap of $ 10,000.

This proposal would still be a regressive tax, offering a disproportionate advantage to those who earn more than $ 200,000.

Rep. Alexandria Ocasio-Cortez, DN.Y., who voted for the bill, always told NY1 that she believed the $ 80,000 for the SALT cap was “too high.”

“I’m open to SALT reforms, I just don’t think we should give tax cuts to the rich,” she said, adding that she “agreed” with Sanders’ proposal to the place.

Moderate Democratic Senator from Montana, Jon Tester, is also not convinced to increase the SALT cap. He told Politico he “might as well take it out”. Not a big fan because I think it gives tax breaks to the wrong people: the rich.

The current SALT plan would cost $ 285 billion in government revenue. Only the combined universal preschool and expanded daycare proposals would cost more, at $ 390 billion.

If the bill left the SALT cap as is, it could offset any of the other proposals and more – clean energy and climate resilience ($ 235 billion), paid family and medical leave ($ 205 billion). ($ 190 billion), clean energy tax credits and children’s tax credits (both $ 190 billion), affordable housing ($ 175 billion), health and community services (135 billion billion) and the expansion of the Affordable Care Act ($ 120 billion).

Under the current bill, households earning $ 1 million or more could receive tax relief 10 times greater than households earning $ 50,000 to $ 100,000 who take advantage of the expanded child tax credit, according to a CRFB analysis.

A family of four living in Washington, DC and earning $ 1 million could pay $ 25,900 less in taxes per year, while a family of four with two children earning between $ 50,000 and $ 100,000 would pay 2,600 $ less per year.

And with Democrats claiming the SALT cap is unfair to the middle class, Republicans have already turned the tables.

“Your child tax credit is one year, but your millionaire tax break is 10?” Representative Jason Smith from Missouri said upstairs in the House.

Rep. Tom Suozzi, DN.Y., who threatened not to vote for the social spending bill without action on SALT, fended off criticism.

‘What is the middle class for us [in New York] is different from what it is in other parts of the country. So we need it for our residents, ”he said.

“It is amazing that Speaker Pelosi wants to hand hard-earned taxpayer dollars back to the wealthiest Americans by raising the SALT cap,” said Rep. Peter Meijer, R-Mich., Opposed to the bill.

“Republicans didn’t take away the SALT deduction because they wanted to tax the rich! They did it to pay for corporate tax cuts and to punish states where we have chosen to pay for better services, ”said Representative Tom Malinowski, DN.J., in defense of raising the cap. . “Our plan would fully restore SALT to the middle class and cost zero over 10 years.”

“The intention of the $ 10,000 cap was to penalize the blue states – I’m not going to let them get away with this,” said Representative Gregory Meeks, DN.Y. “I look at my landlords in my neighborhood and how they were devastated as a result of a $ 10,000 SALT cap, it hurts them a lot.”

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