Democrats call for deal on tax deduction that benefits the rich

WASHINGTON – Democrats were preparing a deal on Tuesday that would repeal a cap on the amount of state and local taxes homeowners can de...

WASHINGTON – Democrats were preparing a deal on Tuesday that would repeal a cap on the amount of state and local taxes homeowners can deduct as part of a larger $ 1.85 trillion expense bill, a move that could amount to a significant tax cut for wealthy Americans in liberal states.

But some liberals quickly backed down from the emerging deal, which would suspend a $ 10,000 cap on the so-called SALT deduction for five years, removing a limit Republicans included in their 2017 tax package as a way to pay for cuts for businesses. and the rich. . The suspension would come into effect for deductions related to property taxes and state and local income taxes accrued in 2021 and would continue until 2025.

If passed, the deal would be a major concession to a handful of Democrats in high-income states like New York and New Jersey who insisted on raising the cap, in order to win their votes for the president’s social policy. Biden and the Climate Change Package. .

But Liberal Democrats scoffed at the push to include the costly proposal in the domestic policy package, especially as party leaders slashed or eliminated other spending priorities as they slash a government plan. $ 3.5 trillion to appease moderate and conservative Democrats.

Senator Bernie Sanders of Vermont, chairman of the budget committee, criticized the repeal Tuesday as a gift to the wealthy that flies in the face of Democrats’ priorities.

“I think there is a compromise to be found here, a common ground, which says that for families earning less than $ 400,000 they can get a full exemption, but not families earning more than that. “said Sanders, who issued a scathing statement criticizing the deal. “What exists is unacceptable, and somehow it will be dealt with.”

It is still unclear whether the deal would apply broadly or whether Democrats were planning to impose an income cap to prevent wealthier Americans from receiving what amounts to a tax cut.

A direct repeal of the limit for each household claiming the deduction would be siphon off huge amounts of income from the federal government: about $ 90 billion per year, according to budget experts.

To get around this problem, the five-year suspension assumes the cap is reinstated in 2026 for an additional five years, allowing Democrats to use a budget sleight of hand to show its removal as revenue neutral in the traditional window. 10 years that lawmakers are considering. when examining the impact of a bill on the federal deficit.

Three people with knowledge of the emerging deal described it on condition of anonymity and warned that talks were continuing. Details of the talks were first reported by Punchbowl News.

With Republicans opposed to Mr. Biden’s domestic policy plan, Democrats must win the support of the 50 senators who caucus with the party and all but three House lawmakers for the plan to become law. This effort is further complicated because Democrats use an obscure process known as budget reconciliation, which protects tax laws from the 60-vote threshold for obstruction in the Senate.

These restrictions mean that any lawmaker, especially in the Senate, could effectively push legislation above their priorities, including insisting that the bill repeal SALT. Democrats in the high-income states that have been hit hardest by the limit have spent the past five years looking for an opportunity to roll it back for their constituents, despite complaints that it would greatly benefit the wealthy.

House Democrats, including Reps Tom Suozzi of New York, Mikie Sherrill of New Jersey and Josh Gottheimer of New Jersey, have made it clear that they will not support the broader spending program without a repeal of SALT. Mr. Gottheimer wore a large button emblazoned with the words “no SEL, no dice” to vote on Capitol Hill on Tuesday. Majority leader Senator Chuck Schumer of New York City also expressed support for removing the cap.

“We’ve been fighting for this for years,” Gottheimer said Tuesday, adding that reinstating the full deduction would be like giving “tax relief to deserving families who got hosed in 2017.”

Delaying the five-year cap within a 10-year window could effectively allow lawmakers to claim that the proposal would not impact the cost of the package. Still, some Democrats seemed convinced lawmakers would act again in five years to prevent the cap from coming back into effect.

“It will be pretty clear when they get a tax break, it will be difficult to get it back,” Gottheimer said, referring to families in his district.

The SALT limit resulted in tax increases for the wealthiest Americans starting in 2018, especially the highest incomes in high-tax states, and helped Democrats win some House seats that Republicans previously held in New Jersey, California and elsewhere.

The deduction is widely used by wealthy homeowners who itemize their deductions and live in states and cities with high taxes, which tend to be run by Democrats. Democrats accused Republicans of using the cap to pay for further tax cuts for the rich and to penalize liberal states.

“I guess the majority of Americans with a net worth of $ 50-300 million would get a tax cut as part of the Build Back Better plan with a complete repeal of SALT,” Jason Furman, Harvard economist who was the Chairman of the White Council of House Economic Advisers under the presidency of Barack Obama, said on twitter Tuesday. “The bill would do more for the super-rich than it does for climate change, child care or preschool. It is obscene.

But several lawmakers from the New York and New Jersey delegations warned that their votes for the domestic policy package depended on the provision’s inclusion, and Democrats haggled for months over a possible solution.

“We’re still working on it,” said Rep. Richard E. Neal of Massachusetts, Democratic chairman of the Ways and Means Committee, who joked Tuesday that he got “a Ph.D. in the SALT deduction because it has been argued from every point of view I can think of.

The Committee for a Responsible Federal Budget described the repeal of the SALT cap as a “regressive” tax cut, estimating that it would cost the government $ 90 billion a year in lost revenue. The richest would do the best, with a repeal of the SALT cap distributing more than $ 300,000 per household in the richest 0.1% of incomes and only $ 40 for a middle-income family in the first two years.

“With the repeal of the SALT cap and the maintenance of current tax rates, the reconciliation program could in fact provide a net tax cut for most high-income households,” the group said.

The right-wing Tax Foundation ruled that repealing the cap increase the after-tax income of the richest 1% of wage earners 2.8 percent, while the bottom 80 percent would get minimal benefit.

Republicans seized the deal on Tuesday, accusing Democrats of hypocrisy for supporting an “anti-progressive” document.

“The first Democrats abolished paid vacation”, JP Freire, spokesman for the Republicans on the House Ways and Means Committee, said on twitter. “Now they are giving money to the rich. “

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Newsrust - US Top News: Democrats call for deal on tax deduction that benefits the rich
Democrats call for deal on tax deduction that benefits the rich
Newsrust - US Top News
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