Home Business framework Democrats prepare to cancel Trump-era SALT cap

Democrats prepare to cancel Trump-era SALT cap

  • Democrats are ready to repeal a Trump-era policy that cut tax breaks for residents of wealthy states.
  • Democrats have already argued that capping the deduction for local taxes has more of an impact on richer blue states.
  • However, one budget expert calls it a “colossal tax cut for the rich”.

Democrats are set to include tax relief in their $ 1.75 trillion social spending plan that will massively benefit top earners.

On Tuesday, Rep. Josh Gottheimer from New Jersey wrote on Twitter that the provision had been added to the plan. A Democratic aide familiar with the negotiations told Insider Democrats are considering a five-year tax break through 2025, a development first reported by Punchbowl News.

The break would also be retroactive to this year.

The SALT deduction allows taxpayers to deduct their total state and local taxes from their federal obligation. As part of Trump’s 2017 tax plan, the previously unlimited deduction was capped at $ 10,000. This primarily affects taxpayers in areas with high local taxes, which tend to be found in wealthier blue states like New Jersey.

Trump’s tax plan particularly affected people with property in multiple states, who were able to deduct their total state property taxes, such as New York City, if they owned property there as well as in a state. neighbor like New Jersey, Pennsylvania, or Connecticut.

Revenge of the SALT Caucus

A repeal enjoys bipartisan support: 32 lawmakers on both sides of the aisle formed a “SALT Caucus” in April. House Speaker Nancy Pelosi said the Trump hat was “petty” and “politically targeted” in targeting wealthy residents of the blue states. He also had the support of Senate Majority Leader Chuck Schumer of New York.

Marc Goldwein, budget expert on the Non-partisan Committee for a Responsible Federal Budget, predicts the five-year SALT deduction would amount to a $ 500 billion tax cut – of which $ 400 billion went to the richest 5% of households .

“That’s a really good question about priorities when they’re willing to give two and a half times more taxes on the rich than they are on the child tax credit and the expansion of the EITC which mainly benefit the poor and the middle class, ”he added. Goldwein said.

Jason Furman, a former senior economist to President Barack Obama, wrote on Twitter that he assumes most Americans with net worth of $ 50 million to $ 300 million would actually get a tax cut.

“Bill would do more for the super-rich than climate change, child care or kindergarten,” Furman wrote. “It’s obscene.”

Not all Democrats agree to this repeal.

Representative Alexandria Ocasio-Cortez said she thought “it was just a gift for the rich,” breaking up with some of her fellow New York representatives. She wrote on Twitter that Congress should not approve a “100% repeal”.

Asked about the SALT tax deduction for the wealthy, New Jersey Senator Cory Booker told Insider, “You clearly haven’t come to New Jersey.”

“I live in a low income neighborhood,” Booker added. “People pay more than $ 10,000 in taxes. So what are you talking about?

“It’s a middle class problem and it’s something that people really care about,” he told Insider.

Democrats are using the party line reconciliation process to endorse the plan against the United Republican opposition. This has given them very little leeway given that they can only spare three votes in the House and zero in the Senate to make President Joe Biden’s economic plans a reality.