2017 Tax Cuts and Jobs Act (TCJA)
Trump’s 2017 tax reform bill (TCJA) put a $10,000 ceiling on ability to deduct SALT (State and Local Tax) deductions on federal tax returns.
Senate Majority Leader Chuck Schumer (D., NY) has vowed to make SALT fully deductible.
Curiously, Bernie Sanders is in bed with Republicans.
Q: What’s going on?
A: Sanders accurately says deductions overwhelmingly benefit the wealthy.
Q: Why did Republicans reduce SALT deductions?
A: To punish high tax, left-wing states like New York and California.
$10,000 Cap
With a $10,000 cap, 96% of the repeal would go to the wealthy.
Sanders inconveniently points out the hypocrisy of the Democrats’ position.
Schumer’s Lie
“We need to cushion the blow of this virus. The SALT cap hurts people affected by the virus. It hurts so many of the metropolitan areas like New York,” said Schumer.
Handout to the Rich
In a “Middle Class Memo” Brooking’s comments “The SALT tax deduction is a handout to the rich. It should be eliminated not expanded“
Brookings concluded “Lifting the SALT cap much more pro-rich than Trump’s tax bill“.
Tax Policy Center Comments
- Lifting the cap on the SALT deduction would massively favor the rich, with most of the benefit going to the top one percent
- Lifting the cap would in fact give almost three times as much, as a share of the cut, to the top one percent as the TCJA cuts did as a whole (of course the absolute amount is very much less)
- Even with the cap, the SALT deduction remains pro-rich, with around three-quarters of the benefit going to families in the top fifth of the income distribution
Strange Bedfellows
A Reason.Com article concludes Bernie Sanders Is (Mostly) Right About the SALT Deduction
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.”
To be clear, it is not just Republicans saying that. Richard V. Reeves and Christopher Pulliam, a senior fellow and research analyst, respectively, at the Brookings Institution, calculated last year that 96 percent of the benefits of a SALT cap repeal would go to the top 20 percent of earners, with the top 1 percent getting 57 percent of the benefits.
“When you hear someone say that they don’t want to raise taxes on the wealthiest 1 percent or corporate America, ask them: ‘Whose taxes you want to raise instead?‘” Biden said.
Tax the Wealthy, Just Not Ours
Biden and the progressives want to raise taxes on the wealthy.
Biden even pledged no tax increases on the middle class to pay for his socialist agenda.
Yet, if Democrats reinstate SALT deductions they will have to propose still more tax hikes somewhere else just to give special favors to the wealthy in California and New York.
Headed to the Gutter
Independent Senator Bernie Sanders along with Democrats Krysten Sinema and Joe Manchin all have expressed serious reservations about Biden’s plans.
In addition, there are 25 New York representatives who demand reinstating SALT for supporting the plan.
Sanders alone could kill this. I suspect in practice he wouldn’t. But trying to appease Sanders, Sinema, Manchin, and all the reps from New York and California is more than a bit problematic.
It looks increasingly likely that Biden’s American Families Plan is headed to the gutter where it belongs.
Ultimately, Congress is likely to pass something, but it will be a tortured hollow shell of Biden’s grandiose American Families plans.
Mish
“Even with the cap, the SALT deduction remains pro-rich, with around three-quarters of the benefit going to families in the top fifth of the income distribution “Most of the top one fifth of income households is not rich. Most are upper middle class. People bought homes with the presumption of the SALT deductions. At the very least it should be phased out (over a 15 year period) for existing homeowners and eliminated for new buyers.
Now they are acting as if they never did anything like that! Why?
John S Kiernan, Managing EditorMar 17, 2021
Federal assistance to states has come into the spotlight recently during the coronavirus pandemic, where some states have received far more money per case than others. For example, in the initial $150 billion given to states from the stimulus package, which was allocated by population, New York got https://apnews.com/48b8109fce0d922a8fb0f5fce20dee92 per positive case while Alaska received over $3.3 million. While the second stimulus package passed in December didn’t include any direct assistance to states, the government still faces questions about whether its initial distribution was truly equitable and efficient, and whether any future aid will be as well.
For years, Americans have looked at federal assistance programs with growing scrutiny, and the number of people dependent on government assistance was https://www.nytimes.com/2020/02/20/business/trump-welfare-poverty.htmlprior to the coronavirus crisis. Regardless of overall trends, though, it is clear that some states receive a far higher return on their federal income-tax contributions than others.
In order to find out exactly how big the difference in federal dependence is from state to state, WalletHub compared the 50 states in terms of three key metrics. Read on for our findings, commentary from a panel of experts, and a detailed explanation of our methodology.
IOW, the poor will get screwed (even more). No wonder the rich love the plan!