In the Build Back Better program, Congress included a proposal to raise state and local tax deduction limits.
This is essentially a tax cut for the wealthiest Americans.
Congress must eliminate this deduction altogether. Taxpayer dollars should not subsidize the rich.
Gary Haglund is a senior fiscal policy analyst at Americans for Prosperity.
This is the opinion section. The ideas expressed are those of the author.
President Joe Biden, Speaker of the House Nancy Pelosi, When Senate leader Chuck Schumer The so-called Build Back Better Act has repeatedly stated that it will be a historic investment in low- and middle-income households paid by tax increases for the wealthy.Still, it was initially excluded from Biden’s Buildback Better FrameworkThe Democratic Party is considering including a change in state and local tax (SALT) deduction caps in its final settlement bill. on Tuesday, Report Lawmakers have shown that they are approaching a contract to retroactively lift the $ 10,000 SALT cap set in 2017 as part of tax reform.The next day, the House Democrats offered a proposal that included: Change Raise the SALT cap retroactively to $ 72,500 until 2031. Both options are regressive and result in tax cuts for the wealthy.
If you abolish the upper limit of SALT deduction, $ 90 billion annuallyIf current legislation sets the cap to expire, raising the $ 10,000 cap to $ 72,500 will cost more than $ 50 billion annually until 2025. Both proposals disproportionately benefit high-income households with little or no benefit to the low-middle class. It makes our tax laws unfair and leads to tax disparities based solely on where you live.
Experts across the spectrum of idealism, including Tax Policy Center When Americans for Tax Reform Council, I agree that abolishing or raising the SALT cap is regressive and inadequate. Insisted Abolishing the cap will benefit the middle class. It couldn’t be far from the truth.
Only wealthy people will benefit from abolishing the SALT cap
Let’s see who is actually in a position to benefit from removing the SALT cap. According to the Brookings InstitutionThe top 20% of income earners receive a 96% profit, and the top 0.1% receive an average annual tax cut of $ 154,000. On the other hand, the bottom 60% of earners have little income. 0.8% Of profit.
Even if Congress decides to increase the cap instead of abolishing it, the change is still very regressive.Tax Foundation Estimate If the SALT limit is less than $ 72,500, 80% of the profit will be over $ 200,000 and 2.5% will be under $ 100,000. The best earner, According to the Responsible Federal Budget CommitteeThe annual tax cut is expected to be $ 23,000. No matter how it is rotated, changing the SALT cap will benefit the wealthy at the expense of low- and middle-income households. In particular, the abolition of SALT caps will bring overwhelming benefits to high-income earners in some states with high state and local taxes.one estimate We conclude that more than 50% of the benefits of removing the SALT cap occur only in the four states of California, New York, New Jersey, and Illinois.
To be fair, people with the same income and living environment must be liable for the same federal taxes. If you undo the full SALT deduction, that’s impossible. As a result, people in similar positions in low-tax states will pay larger federal tax invoices than people in high-tax states. More simply, people in low-tax states pay more for the same federal service. This is unfair and represents an income transfer from a low-tax state to a high-tax state.
The government will have to raise taxes to pay for it
Including this tax cut for the wealthy in the settlement bill means that there may be other offsetting tax increases to pay for it. A five-year retroactive abolition is estimated to bring the government about $ 475 billion in revenue. By the end of 2025..Independent taxation joint committee to look at its costs Estimated Raising the maximum federal income tax rate to 26.5 percent means that you will earn $ 480 billion in the first nine years of enactment. This is a nine-year income from one tax increase that is financially damaging to support the payment of a five-year tax cut for the rich.
If you raise the limit to $ 72,500 Will cost $ 222 billion by 2026The current SALT cap is set to expire at the end of 2025, so extending the cap to 2031 seems to have increased earnings in later years, offsetting the increase in the SALT cap. increase. This is just a classic Washington accounting gimmick.
The so-called Build Back Better Act is not lacking in bad policies.It will increase taxes Middle class, Lower wages, Raise the price, When Shrink the economy..Democrats are not allowed to include such explicit interests in wealthy households, but other Curve out to a special interest It’s not surprising as it’s included in the package.
Instead of abolishing or raising the SALT cap, lawmakers must either eliminate the deduction altogether or maintain at least the $ 10,000 cap set in the 2017 tax bill. Taxpayer dollars should not be used to subsidize wealthy families living in states with high state and local taxes.
Read the original article Business insider