Democrats just can’t get out of their own way. As negotiations around the Build Back Better Act continue, a small group of House Democrats are undermining their party’s ability to sell the legislation to the American people by including a proposal in the Act to lift the state and local tax (SALT) deduction cap. Doing so would put more money into the pockets of millionaires at the expense of everyday Americans.
We’ve talked about SALT in the past, but with a vote on the Build Back Better coming up and the House and Senate still split on how to treat this important tax proposal, this week we’re taking a closer look at what the SALT cap does and why raising it is bad news for most Americans.
The SALT cap, or the limit on how much in state and local taxes taxpayers can deduct when calculating their federal tax bill, was initially cooked up by Paul Ryan and his GOP colleagues as part of a blue state revenge plot in their 2017 tax bill, has ended up being one of the few parts of that bill that is worth keeping. It is one of the few progressive pieces of that bill, and it overwhelmingly affects the richest Americans. But despite its progressivity, some Democrats, particularly those from higher-tax states that are most affected by the cap, want to lift its current $10,000 limit up to $80,000.
This change would be a massive giveaway to rich Americans. According to an estimate from the Tax Policy Center, lifting the SALT cap to $80,000 would give about two-thirds of Americans making over $1 million an average tax cut of $16,800 a year. Middle-income households, on the other hand, would get an average tax cut of just $20. Even households making between $175,000 and $250,000 would only get an average of $400 per year. This is a tax cut overwhelmingly targeted to the extremely rich, and that is simply unacceptable.
The last people who need government assistance right now are the well-off taxpayers who would be most affected by this change. Wealthy Americans already have so many advantages over everyone else – it is high time that we pay more, not less, in taxes.
If Democrats absolutely have to change the SALT cap, the only acceptable change is the proposal by Senators Bernie Sanders (I-VT) and Bob Menendez (D-NJ). Their proposal exempts people making under $400,000 a year from the SALT cap entirely and makes permanent the current $10,000 limit for people making above that amount. This would target relief to middle and lower-income taxpayers in high-tax states while also ensuring that millionaires and billionaires in those states don’t get yet another tax cut that they don’t need.
This choice isn’t happening in a vacuum. Democrats have already cut trillions of dollars of vital aid for American families from their reconciliation plan. Adding a significant tax cut for the wealthiest Americans on top of this would be adding insult to injury. They cannot, and must not, pass any tax cuts for millionaires in their reconciliation bill.
Choosing tax cuts for the rich over expanding aid to needy Americans would be a disaster both in principle and politically. No millionaire should be getting a tax cut from this reconciliation bill. If Democrats want to be the party of working people, they need to start legislating like it.