In their drive to approve a nearly $2 trillion tax and budget package in Congress, Democrats have tried their best to target high-income earners, aiming for new tax revenues to be used to finance a host of social programs.
It was a familiar cry from the 2020 presidential race, when Democratic candidates debated various ideas including a ‘wealth tax’ to raise trillions in new revenues.
In the ongoing reconciliation debate in Congress, Democrats are still talking about taxing the rich — but they’re also simultaneously pressing a large tax cut that will mainly help upper-income earners.
At issue is SALT — shorthand for the State and Local Tax deduction — which was limited by the Trump tax cut of 2017 in a way that Democrats felt targeted their supporters.
Under current law, taxpayers who itemize their tax returns can only deduct up to $10,000 of state income taxes or local property taxes.
The $10,000 cap hit taxpayers mainly in California and the Northeast Corridor from Washington, D.C. to Boston, areas featuring more expensive homes, higher local taxes, and more Democratic voters.
But the SALT replacement plans have raised eyebrows among some Democrats, since most of the tax advantage would go to those earning over $200,000 a year.
“Why are they doing this?” asked Jason Furman, the top White House economic adviser to President Obama.
The latest plan in Congress would keep the cap in place, but raise the maximum yearly deduction to $80,000 in state and local taxes — at a cost of $300 billion.
Let’s just say this — if you are paying $80,000 a year in state and local taxes, you are not in the middle class.
“We find that a household making $1 million per year will receive ten times as much from SALT cap relief as a middle-class family will receive from the child tax credit expansion,” declared the Committee for a Responsible Federal Budget.
The SALT plan has given Georgia Republicans one more reason to denounce what Democrats are trying to get through Congress. U.S. Rep. Andrew Clyde, R-Athens, said “tax cuts for the rich” were among the prime mistakes in what he labeled a ‘Big Government Socialist spending package.’
“They are completely out-of-touch with Americans,” said U.S. Rep. Austin Scott, R-Tifton.
“Americans simply can’t afford these out-of-touch and expensive policies,” said U.S. Rep. Drew Ferguson, R-West Point.
Polls have consistently shown strong bipartisan support for new taxes on the rich, but Republicans in Congress have rejected that course, arguing they would have a detrimental impact on small businesses.
Democrats want to tax the rich — but they can’t seem to get away from giving them a big tax break, either.
Jamie Dupree has covered national politics and the Congress from Washington, D.C. since the Reagan administration. His column appears weekly in The Atlanta Journal-Constitution. For more, check out his Capitol Hill newsletter at http://jamiedupree.substack.com
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