Democrats Push for Agreement on Tax Deduction That Benefits the Rich

The SALT limit resulted in tax increases for wealthier Americans beginning in 2018, particularly higher earners from high-tax states, and helped Democrats capture some House seats that Republicans previously held in New Jersey, California and elsewhere.

The deduction is largely used by wealthy homeowners who itemize their deductions and live in states and cities with high taxes, which tend to be led by Democrats. Democrats accused Republicans of using the cap to pay for other tax cuts for the rich and to penalize liberal states.

“My guess is the majority of Americans with a net worth of $50 to $300 million would get a tax cut under the Build Back Better plan with a full repeal of SALT,” Jason Furman, an economist at Harvard who was the chairman of the White House Council of Economic Advisers under President Barack Obama, said on Twitter on Tuesday. “The bill would do more for the super-rich than it does for climate change, childcare or preschool. That’s obscene.”

But several lawmakers in the New York and New Jersey delegations have warned that their votes for the domestic policy package hinged on the inclusion of the provision, and Democrats have haggled for months over a possible solution.

“We’re still going at it over it,” said Representative Richard E. Neal of Massachusetts, the Democratic chairman of the Ways and Means Committee, who joked on Tuesday that he had earned “a Ph.D. in the SALT deduction because it’s been argued from every perspective I can think of.”

The Committee for a Responsible Federal Budget described the repeal of the SALT cap as a “regressive” tax cut, estimating that it would cost $90 billion a year in lost government revenue. The wealthiest would make out the best, with a SALT cap repeal distributing more than $300,000 per household in the top 0.1 percent of earners and only $40 for a middle-income family over the first two years.

“With the SALT cap repealed and current tax rates retained, in fact, the reconciliation package might actually offer a net tax cut for most high-income households,” the group said.

Article source: https://www.nytimes.com/2021/11/02/us/politics/salt-cap-tax-deduction.html