Why the Blue States Democrats are fighting to give tax cuts to the rich

“The 360” presents a variety of perspectives on the day’s top stories and debates.

what’s happening

In negotiations over the Democratic Party’s large-scale social spending proposal, lawmakers representing some of the country’s bluest regions are fighting for an unexpected cause: tax cuts for the rich.

The focus of the debate is the deduction of state and local taxes, commonly referred to as SALT. This allows taxpayers to reduce their federal tax claims by deducting the amount paid for state and local taxes from their income. Although technically available to everyone, SALT deductions have historically been most beneficial to high-income earners living in high-tax cities and states. In 2017, a Republican-led parliament set a $ 10,000 deduction limit as part of former President Donald Trump’s tax reform. The change affected the blue states disproportionately. Because the blue states have the highest tax rates and the concentration of the wealthiest residents.

Democrats in states such as California, New York, and New Jersey have been calling for the removal of the SALT cap as part of their buildback better program for months... ” We have found that the benefits of removing the cap go almost exclusively to the wealthiest Americans.According to one The top 0.1% of income earners receive an average tax cut of over $ 150,000, and middle-income households can save about $ 37.

Why there is a debate

Not surprisingly, many Democrats oppose a colleague’s push to lift the SALT cap.Vermont was independent among the most vocals He said removing the cap would be a betrayal of the party’s vision of voters during the campaign: “very wealthy people will ultimately pay a fair share.”

Removing the cap also means that the government misses a potential tax revenue of $ 85 billion annually. This is the money that can be used to fund various programs on the Social Expenditure Bill. Conservatives, usually tax-reduction fans, are almost uniformly opposed to raising the SALT cap because they believe that blue states and cities will motivate them to raise local tax rates further.

Proponents of raising the cap argue that the current setting unfairly punishes people living in high-tax states.Senate leader On behalf of New York, the current system is similar to “double taxation,” which robs local citizens of the money they can invest in their communities.Speaker of the House She said the cap was “catastrophic” to the inhabitants of her home state of California since it was implemented.

Despite strong opposition from some Democrats, there is also a general understanding within the party of the political incentives behind promoting the resurgence of SALT. He said parent SALT members are open to a “compromise approach” that allows them to give some relief to their members, but limits the amount of profits of the ultra-rich.

What’s next

The latest version of the Build Back Better plan included exactly that. .. This will raise the cap from $ 10,000 to $ 80,000 over the next 10 years. But it’s too early to know if the plan will satisfy skeptics in the House or Senate.


Removing the SALT cap violates the basic principles of the Democratic agenda.

“The Democratic Party has called the president’s agenda as a plan to create jobs and strengthen social safety nets that will make tax law more progressive …. Retroactively abolishing restrictions on SALT deduction proposals is the exact opposite. Will go in the direction. “— Garrett Watson,

Low tax revenue means less money to fund important programs

“Eliminating the SALT cap, even temporarily, entails enormous opportunity costs. The Democratic Party has significantly reduced the size of President Biden’s Build Back Better social spending bill to satisfy moderates. At that time, the SALT cap break is sucking up billions of dollars that can be used elsewhere. “—Howard Grecman,

Congress should give handouts to states that overtax their citizens

“Democrats in the Blue States have fought to regain the ability of wealthy residents of high-tax jurisdictions to deduct state and local taxes from federal bills. For decades, it has been a low-tax state. It was a destructive policy that effectively subsidized taxes on residents and forced them to use more free state policies. “— Philip Crane,

SALT deduction promotes inequality

“By limiting SALT deductions, Congress has begun to dismantle one pillar of the racist system that impedes racial equality. It should not be rebuilt. Instead, it makes America more equitable. Fund a program that actually takes steps to help. ”—Michael Badder and Alana Hackshaw,

There is a better way for the state to secure funding to fund social programs

“SALT deductions are inefficient subsidies. The main beneficiaries are the wealthy people who receive tax cuts. Collect those dollars from the wealthy people and then provide direct federal financial support to state and local governments. It would make more sense to do. ”—Editorial,

Political pressure means that Democrats will be forced to enact some form of SALT reform.

“Because the top Democrats in the House are from California and the top Democrats in the Senate are from New York, there are still plenty of incentives to abolish SALT …. Moreover, leadership is an option and the Democratic block. Is working on a fix for SALT. “— Ben Jacobs,

Conservatives should love SALT

“The SALT cap is a heavenly mana for politicians in countries eager to expand their federal government, while reducing their ability to tax cities and states and thus managing their own policies. Decrease. Basically, the cap changes the vision of the founder of the federal government with “minority-defined” authority on it. [head].. — John Tamney,

Setting a cap on SALT makes the state hesitant to invest in citizens

“Allowing taxpayers to deduct the full amount of state and local taxes from their federal tax statements is one of the federal government’s most powerful tools to encourage state and local governments to invest in important public services. One. ”— Randy Weingarten and Edward A. Kelly,

SALT is also useful for the middle class

“What do you guys know? It’s not just the” rich “that have been hurt by the SALT cap. It seems that there are too few people to evaluate and almost no one is discussing it. Many homeowners with relatively modest means have been hurt by caps because it reduced the market value of their homes. — Alan Sloan,

There is space for the middle class to help the middle class, not the wealthy

“In high-cost states like New Jersey with brutal property taxes, the SALT cap also hits the middle class … the challenge is a compromise to protect the middle class without giving the rich the wind and rain. It’s about making a plan. “— Tom Moran,

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