As Democrats in Congress sort out the final details of their landmark Build Back Better Act, a bill packed full of aid for American families and long-overdue tax increases on wealthy individuals and corporations, they appear poised to make a significant last-minute mistake that will undermine both the positive economic and political impacts of the bill. If Democrats want their bill to be a success, they cannot lift the SALT cap.
In their sweeping 2017 rewrite of the tax code that handed over billions in tax breaks to the wealthiest corporations and individuals, Republicans in Congress and President Trump included a provision that capped the once limitless deduction for state and local taxes (SALT) on federal returns at $10,000 dollars. Although the cap was initially created as a punitive attack against the GOP’s political adversaries in coastal blue states, it has ended up being one of the few pieces of the bill worth preserving.
It’s disappointing that the Build Back Better Act doesn’t contain more aggressive tax increases on the rich or rollbacks of the Trump tax cuts, but it’s beyond insulting that in the wake of that failure, some Democrats are working to make our tax code more regressive by removing the one progressive tax provision within the 2017 bill. The House’s version of the bill would change the cap from $10,000, an amount that already overwhelmingly affects the well-off, to $80,000, which would give millionaires like me a significant tax break.
But don’t just take my word for it. Estimates by the Tax Policy Center show that raising the SALT cap to $72,500 would significantly benefit wealthy families, with only 1.6% of middle class families seeing a benefit that would average out to a tax cut around $20 dollars. This is simply because many working class and middle class Americans do not make enough to benefit from a high SALT cap deduction. And with the current Democratic plan now at a cap of $80,000 dollars, the benefits are likely to be skewed even farther in favor of the rich.
As a wealthy individual from a blue state who would directly benefit from an increased cap, let me make one thing clear to Congressional Democrats – I do not want this tax break. Do not raise the SALT cap for my sake.
In the midst of record breaking wealth inequality the last thing the Democratic party should be doing is working to decrease taxes on the wealthiest Americans. Wealthy individuals like myself are doing better than ever. We’re currently enjoying the boons of a skyrocketing market, exemplified by California’s ongoing record breaking surplus, funded by our capital gains taxes. We don’t need another cut.
If Democrats are going to insist on changing the SALT cap, there is a targeted approach to adjusting the SALT cap that will ensure relief goes to only those who need it. Last week, Senators Sanders and Menendez introduced a proposal to eliminate the SALT cap for those that make under $400,000 dollars annually, while leaving it intact for anyone making more. Under this plan, working and middle-income folks in California with high property taxes can benefit without giving billionaires a tax cut.
Democrats campaigned on removing tax breaks for the rich and curbing the seemingly exponential growth of wealth inequality. Lifting the SALT cap would be a clear giveaway to wealthy donors and a betrayal of their campaign promises. Democrats are already seen as the party that represents the coastal elites, and if they end their first two years in power by failing to remove a single GOP-enacted tax cut while instead doubling down on a tax break for the rich, then the losses in Virginia will pale in comparison to the disaster waiting for them in the midterms.
If Democrats want to hold onto the gains they made in the 2020 election, they should be focused on raising taxes on wealthy folks like me, not cutting them. It’s not hyperbole to say that the fate of the party over the next decade could be determined by what our tax code looks like at the end of these negotiations. The American people are fed up with elites always getting their way while they continue to receive the scraps. We are faced with a unique opportunity to unrig our tax code in favor of the 1 percent. I urge Democrats to keep the cap on SALT and continue the fight for tax fairness.