In the latest version of the White House’s Build Back Better plan, House Democrats have managed to offer big rewards to wealthy taxpayers in blue states while keeping the cost of the plan under $1.75 trillion.
The second-biggest program in the latest version of President Biden’s Build Back Better legislation is a $285 billion tax cut that would almost exclusively benefit high-income households, but New Jersey Democrats demanded that the provision be included in the spending plan.
The House is poised to vote this month on an updated version of the reconciliation legislation but Democrats have cut trillions of dollars of vital aid for American families from their plan while adding a significant tax cut for the richest Americans.
“Democrats just can’t get out of their own way,” said a statement from Patriotic Millionaires. “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.”
As part of Donald Trump’s 2017 Tax Cuts and Jobs Act, Republicans capped the amount of state and local taxes individuals could deduct on their federal tax returns at $10,000.
The complete elimination of the SALT deduction has long been a goal of tax reformers, and many viewed the cap as a step in the right direction but the GOP did it to stick affluent taxpayers in predominantly Democratic states.
Based on preliminary estimates from the White House, the Joint Committee on Taxation (JCT), and the Congressional Budget Office (CBO), the latest version of the bill includes roughly $2.4 trillion of spending increases and tax cuts through 2031 along with $2.2 trillion of offsets.
Raising the SALT cap will reduce revenue by $300 billion over the next five years.
The result is a roughly $200 billion deficit increase over ten years and among the items left out are free community college and Medicare coverage for hearing, dental, and vision.
According to the Tax Policy Center, a joint project from the Urban Institute and the Brookings Institution, only 16 percent of tax filers with income between $20,000 and $50,000 claimed the SALT deduction in 2017, while 76 percent of tax filers with income between $100,000 and $200,000 claimed it, and more than 90 percent of tax filers with income above $200,000 did.
Representatives Josh Gottheimer, Tom Malinowski, Bill Pascrell, Jr., and Mikie Sherrill threatened to oppose the budget reconciliation package unless there was a restoration of the SALT deduction.
Sherrill, Malinowski, and Gottheimer represent districts with lots of high-earning individuals paying high taxes, but they are opposing an alternate plan proposed Sens. Bernie Sanders and Bob Menendez that would keep the $10,000 cap in place, but only for taxpayers making more than about $400,000 to $550,000, depending on estimates from Congress’s nonpartisan Joint Committee on Taxation. For taxpayers who make less than that, there would be no SALT cap.
“If Democrats want to be the party of working people, they need to start legislating like it. They cannot, and must not, pass any tax cuts for millionaires in their reconciliation bill,” said Patriotic Millionaires.