The “Build Back better” plan of President Joe Biden was billed as an unprecedented rebalancing America’s socio-economic scales. Democrats planned to tax “The Rich” to finance a huge expansion in government benefits for everyone.
The package is expected to provide a tax reduction for America’s most wealthy citizens.
It’s in large part because Democrats are now planning to completely repeal the SALT (state and local tax) deduction cap. This cap was imposed in 2017 as part of federal tax reform. It allows Americans to subtract up to $10,000 from their federal taxes for state and local taxes. This cap is sufficient to cover the majority of Americans. However, the 2017 federal tax reform law made it so that rich Americans couldn’t take advantage of an indirect subsidy which eased the financial burden associated with living in high-tax states or areas.
Legislators from California, New Jersey, New York and other tax-exempt states have prioritized restoring SALT deductions (or raising the caps) as a priority. They will prevail.
Today’s news is encouraging for a SALT cap repeal to be included in the final reconciliation package — a huge win for New Jersey!
You can read my Statement here @RepTomSuozzi @RepSherrillYou can find this link: pic.twitter.com/07TPwj9R1u
— Rep Josh Gottheimer (@RepJoshG) November 2, 2021
It’s obvious: The SALT cap being removed is an enormous tax relief for very wealthy Americans. The Tax Policy Center estimates that only 9 percent of American households will benefit from the repeal of the SALT cap. Only the richest 1 percent American households will be eligible for 56 percent.
The Joint Committee on Taxation reports that “approximately 99%” of the drop in taxes is attributable to those with more than $100,000 of economic income. This independent data-crunching agency, which is housed within Congress, says this.
Biden’s “framework” revision would include the SALT repeal, which would make the total package a $30 billion tax CutThe wealthiest five percent of Americans in next year’s budget according to a report from the Committee for a Responsible Federal Budget. This non-profit advocates for reducing the deficit.
According to the CRFB, a 5-year repeal of tax would have a cost of $475billion. The top 5 percent of households will get $400 billion. This is greater than any part of Build back Better. It includes the Child Tax Credit and spending on pre-K and child care.
While there are no inherent problems with tax cuts, the rich already contribute a large portion to the federal government. The SALT deduction can be problematic from libertarian reasons. It doesn’t matter how much your state pays to you, it should only affect the amount you owe the federal government. Wealthy residents of California or New York who want to pay less in taxes should move to a lower-tax state or vote for politicians who will cut taxes—not have their tax bills subsidized by residents of other places.
This is also bad policy as the SALT deduction acts as a subsidy to state governments which impose high taxes. Residents of these states don’t have to pay the entire burden of federal and state taxes. This protects politicians from the political cost of approval of expensive, often inefficient projects. The SALT deduction should be abolished has for yearsbeen part in bipartisan efforts to change federal spending- and tax policy.
Biden didn’t include repealing the SALT limit in his Friday announcement. It is notable. However, reports indicated that Democratic leaders gave assurances that they would repeal the SALT cap almost immediately. We would Included in the final package. Those rumors were finally confirmed on Tuesday by Rep. Josh Gottheimer (D–N.J.A long-standing advocate for repeal,
So it’s not surprising that Biden and others tried to conceal the repeal of SALT. Its inclusion makes the overall package significantly less attractive to progressives—possibly even UnTheir eyes were progressive, considering the total cost of repealing the SALT caps and the thin slice of well-to-do Americans who benefitIt. Study after study shows that repealing SALT could also reduce housing affordability, which is a violation of Biden’s professed progressive goals.
Biden’s plan to “Build Back Better”, which includes the repeal of SALT, would do more for “super-rich” than for “climate change, childcare or preschool.” tweetedJason Furman is the former Chairman of President Barack Obama’s Council of Economic Advisors. It’s absurd.
“The last thing we should be doing is giving more tax breaks to the very rich,” Sen. Bernie Sanders (I–Vt.) tweetedon Tuesday. “Democrats campaigned on Tuesday for an agenda that demanded that the extremely wealthy pay their fair shares, and not more tax breaks.”
There is no telling what might happen after the chaotic negotiations between Congress, the White House and Congress over a bill that seems increasingly like Biden’s best shot at passing an important set of domestic policy before the midterm election. Although the SALT repeal supporters seem quite confident in their ability to get what they want, the White House and progressives could make a difference.
The House of Representatives’ progressives had already to agree with the removal of an economically popular program for paid leave from Biden’s agenda because they considered it too expensive. According to CRFB, the cost of the paid-leave problem is $540B over 10 years. However, repealing the SALT cap will only “cost” $475B (in reduced revenue) over the next five years.
A few days after the end of paid leave, Democrats now promise big dollars to some of America’s most wealthy citizens. This progressive takeover, which we hear so much about, doesn’t appear to be working as expected.