The SALT tax deduction allows state and local taxes like property taxes to be deducted from federal taxes. The deduction is particularly beneficial to wealthy property owners in Democratic states, which typically have higher property tax rates. In 2017, the deduction was capped at $10,000 under President Trump’s tax reform bill, in what many saw as a Republican attack on blue states.
Repealing the SALT cap would cost the government $600 billion in revenue over nine years. That outlay would essentially negate any financial benefits from the Democrats’ proposal to raise the corporate tax rate from 21 percent to 25 percent, the party’s preferred alternative to Biden’s proposed 28-percent corporate tax rate. With all of the money from raising the tax rate being funneled back to wealthy homeowners, there would likely be little money left to fund Biden’s infrastructure package.
“I want to tell you this: If I become majority leader, one of the first things I will do is we will eliminate it forever,” Schumer said during a July 14 press conference on Long Island. “It will be dead, gone, and buried.”
“It” in this case was the cap on the state and local tax (SALT) deduction, which was imposed as part of the 2017 federal tax reform bill passed by Republicans and signed by President Donald Trump. As a result of that law, Americans are allowed to deduct a maximum of $10,000 in state and local tax payments from their federally taxable income; previously the deduction was uncapped, and it overwhelmingly benefitted the richest households while shifting their federal tax burden to everyone else.
Sen. Bernie Sanders (I–Vt.) is correct to point out, as he did in an interview with Axios this week, that the SALT cap creates a serious optics problem for Democrats. Sanders says he will oppose Schumer’s effort to attach the SALT cap repeal to the transportation bill because “it sends a terrible, terrible message when you have Republicans telling us that this is a tax break for the rich.”
It’s not just a matter of the state/local tax levels for each state, but also what income levels are like for the state.
In any case, the pattern of which states’ taxpayers get the biggest boost from SALT deductibility might surprise you a little, such as with Utah and Georgia. But many aren’t surprising at all, such as New York and New Jersey.
But even without considering the geographical footprint, obviously high-income folks get the biggest boost from removing the SALT cap. This has been known since the TCJA back in 2017 when they imposed the cap to begin with. It’s partly why it was done.
The debate over Democrats’ next move on infrastructure, which Biden has put forth as part of his American Jobs Plan, and whether and how to pay for it through taxes, is just getting started. Plenty of proposals are going to be on the table, including SALT. The White House has signaled some openness to it, but the matter is far from settled.
“If Democrats want to propose a way to eliminate SALT — which is not a revenue raiser, as you know; it would cost more money — and they want to propose a way to pay for it, and they want to put that forward, we’re happy to hear their ideas,” White House press secretary Jen Psaki said at a press briefing on April 1.
According to estimates from the Center on Budget and Policy Priorities, if the SALT cap — which is set to expire in 2025 — were to be repealed earlier, it would overwhelmingly benefit those at the higher end of the income scale — the ones who were hurt by the bill back in 2017. The CBPP estimates that more than half of the benefit would go to the top 1 percent, and over 80 percent would go to the top 5 percent, of earners.
The proposed changes would make public employees work longer hours and contribute more money. When it was time to receive the pension, there would be less.
The proposed budget has $150 million for the pension program.
“We just have to take a look, do the best we can to protect those who are heavily invested,” Governor Phil Scott said on Friday. “We’ll come to some conclusion hopefully they come through but these are difficult times when the majority party is faced with this much pushback.”
This plan, brought forward by Democrats, is receiving heavy backlash from the teachers and police unions.
As The Daily Poster reported back in January, congressional Democrats in states like New York and New Jersey have been pushing for a repeal of the SALT deduction caps. Biden declined to include the SALT cap repeal in the American Rescue Plan.
If the SALT cap was fully repealed, nearly all — 96 percent — of the tax benefits would flow to the top quintile of earners, and more than half of the benefits would go to the top 1 percent of earners, according to data from the Brookings Institution. Congress’s Joint Committee on Taxation found that the majority of the benefits of a SALT cap repeal would flow to households earning more than $1 million.
Progressive Senate Democrats suggested that their new plan to tax unrealized capital gains at death should come with a $1 million per-person exemption, setting that line 10 times higher than an earlier Obama administration proposal and shielding a larger swath of upper income households.
A discussion draft released Monday by Sen. Chris Van Hollen (D., Md.) and others marks a first attempt to put details on an idea that President Biden endorsed during last year’s campaign. Capital-gains taxation is likely to spur significant debate in coming months as Democrats look to raise money from high-income households to pay for Mr. Biden’s proposed spending on infrastructure and social programs.
Under current law, someone who dies with appreciated assets—including homes, businesses and stocks in taxable accounts—doesn’t have to pay capital-gains taxes on that increase. Instead, the heirs have to pay capital-gains taxes only after they sell and only on gains after the original owner’s death. That “stepped-up basis” is a longstanding feature of the tax code, but it has come under increasing attacks from Democrats who see wealthy people’s profits escaping the income tax.
Fellow Democratic legislators in New York weren’t buying Gov. Andrew Cuomo’s explanation Monday as to why he refused for months to release a true accounting of nursing home residents who died from the coronavirus.
Assemblyman Ron Kim (D-Queens), whose uncle died from COVID-19, bluntly said that “all of it is BS” and a cover-up.
“They could have given us the information back in May and June of last year. They chose not to,” Kim said after hearing Cuomo was blaming the Department of Justice probe for delays in releasing the accurate coronavirus death tally of nursing home residents.