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Democrats Tax Cuts for the Wealthy in NY and NJ Spotlights Build Back Better Hypocrisy

State and Local Tax (SALT) deductions have made hypocrites out of the entire group of House Democrats.
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Hypocrites R Us

Tax Plan Inflames Democratic Debate

House Democrats are in a fresh revolt over SALT. 

It's a fine (hypocritic) time for it given they all voted for the Build Back Better build. 

BBB is now in the hands of the Senate where an Inflamed Discussion is taking place. 

House passage of Democrats’ $2 trillion education, healthcare and climate package has inflamed an intraparty debate about whether the bill gives overly-generous tax benefits to high-income Americans.

At the center of the dispute is the House plan to raise the $10,000 cap on the deduction for state and local taxes to $80,000 through 2030. A small but committed group of lawmakers from high-tax states like New York and New Jersey have for years insisted on repealing the $10,000 cap, which Republicans put into place as part of the 2017 tax law.

“I think it’s bad politics, it’s bad policy,” Sen. Bernie Sanders (I., Vt.) said to reporters. “The Democrats correctly have campaigned on the understanding that amidst massive income and wealth inequality, we’ve got to demand that the wealthy start paying their fair share of taxes, not give them more tax breaks.”

Setting the tax-deduction cap at $80,000 without an income limit means that its benefit goes to even the highest-income households, who all would save $25,900 more in taxes than they do under current law. Nearly one-third of the benefit of that $80,000 cap would go to the top 1% of households, according to the Tax Policy Center.

The inclusion of the higher state and local tax deduction, or SALT, cap means the bill overall would provide a net tax cut to many wealthy households. According to the congressional Joint Committee on Taxation, more than two-thirds of households with income over $1 million would get a tax cut in 2022.

One Non-Hypocrite

The only Democrat non-hypocrite in the House (on this issue) is Rep. Jared Golden of Maine.

Golden voted against BBB, criticizing its “tax giveaways to millionaires.”

Lie of the Day

In the lie of the day, Pelosi presented this feeble excuse “This isn’t about who gets a tax cut, it’s about which states get the revenue that they need in order to meet the needs of the people, and that is a fight that I will continue to make.”

Pelosi was a late supporter of the break for millionaires when she discovered she needed votes of Democrats in NY and NJ to pass BBB. 

Senator Michael Bennett Chimes In

Senator Bennett is a Democrat from Colorado. 

Question of the Day

Ok Bernie where do you stand? 

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There is no way he will vote against BBB but he will likely lower the deduction to a number that gives something like 50% of the benefit to the wealthy instead of 70%.

Meanwhile, the House Progressive Caucus Group of about 100 hypocrites silently hopes the Senate does their dirty work for them (raise taxes on the wealthy in NY and NJ).

No matter what amendments pass the Senate, it is nearly certain the House will approve them. 

Four Changes to Expect

  • Reduction but not elimination of SALT change.
  • Immigration reform goes out the Window. It's a nonbudget item and against Reconciliation rules.
  • Manchin will remove the provision that Electric Vehicle credits go to unions only (assuming the Senate parliamentarian does not remove that provision first as a non-budget item).
  • Manchin wants any extension of the Child Tax Credit (CTC) to include a “firm” work requirement and be limited to parents with “family income” of about $60,000 or less. 

There will be other changes too, but I have no idea what they will be. Something always comes up.  

Manchin could easily kill the whole thing. Sensible people hope he does. 

Instead, expect some tinkering around the edges. That tinkering is likely to reduce the CBO cost estimate to a fully paid $1.5 trillion package. 

But at least credit Manchin that we do not see an immediate $4 trillion monstrosity. It will now only be an immediate $1.5 trillion monstrosity.

Who Has the Courage?

The lower monstrosity only sticks if Republicans get control of at least one branch of government and they then really do let the temporary entitlement programs expire.

In practice, entitlement programs have never before been cut. Perhaps it's different this time. 

For related discussion, please consider Profiles in Non-Courage

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