Several Democrats from New York and New Jersey this week threatened to withdraw support for the Biden $2.25 trillion infrastructure measure, unless the SALT deduction cap is eliminated.Rep. Nancy Pelosi is wanting to add a tax break for rich Democrats in the infrastructure bill. She wants to restore the SALT deduction. (State and Local Taxes) Currently, they can only write off a maximum of $10,000 and she wants to make it unlimited. That allows the rich to write off their property tax, state tax, and local taxes. Millionaires save more. The cost of her action would cost the Treasury a ton of money every year.
The State and Local Tax, or SALT, deduction cap affected millions of homeowners in high-tax blue states. The revenue was used to fund part of the overall 2017 tax cut bill, which reduced corporate and individual rates.
Sen. Pat Toomey, a Pennsylvania Republican, said, “Restoring the SALT deduction would once again force low- and middle-income people to subsidize wealthy individuals in high-tax states and municipalities,”.
It will also give Democratic governors an excuse to raise taxes even more. Not that Democrats ever really need a reason to raise taxes. It’s in their DNA. So, the Democrats get a cut, the state will take a cut and Joe Biden will take a huge bite out of their wallets. Come to think of it, the rich may come out of this with a loss. You can only cut a pie so many times.
Democratic members in high-tax states like New York, New Jersey, Maryland, and California are under increasing pressure from their wealthy homeowners to get rid of the cap. They’re also hearing it from members of their state legislatures and local governments.
Biden’s infrastructure proposal would raise corporate tax rates, and he is also expected at some point to hike takes on household incomes above $400,000 and expand the estate and capital gains taxes.
“We will not accept any changes to the tax code that do not restore the SALT deduction,” Reps. Bill Pascrell and Josh Gottheimer, both of New Jersey, and Tom Suozzi, of New York, said in a statement.
Republicans have criticized past efforts by the Democrats to repeal the SALT cap. They say removing the cap bails out high-tax states and wealthy homeowners and should remain in place.