SALT relief: Democrats are looking in the wrong place
First, we have heard that Bernie Sanders is opposed to a tax hike. Now, we learn that he wants to partially restore a tax deduction mainly used by the richest.
On Sunday, Sanders said he would not support an infrastructure bill that included an increase in the gasoline tax. Tuesday, Bloomberg reported that Sanders has plans to partially revive the National and Local Tax Deduction (SALT) for some taxpayers.
Taxpayers can deduct the amount they pay in state and local taxes from their income for their federal tax returns. The Tax Cuts and Jobs Act 2017 (TCJA) capped the SALT deduction at $ 10,000 as a payment to reduce the impact of the bill on the deficit. Very few Americans pay more than $ 10,000 in state and local taxes. Those who mostly live in high-tax states (read: controlled by Democrats) and have large property tax bills (read: they own valuable property).
According to a joint commission on taxation report As of 2018, 91% of the SALT deduction profits in 2017 (the last year it was not capped) went to taxpayers earning more than $ 100,000 per year. 42 percent of the benefit went to taxpayers earning more than $ 500,000 per year.
How exactly Sanders wants to revive the deduction remains to be seen. In a conversation with himself that Bloomberg overheard, Sanders said, “Do I think billionaires should get tax break in this area? I don’t. ”According to Bloomberg:
Democrats have discussed several ways to offer limited SALT relief, including offering the full deduction for a few years or setting income thresholds for those who qualify for the tax break. The $ 120 billion in Sanders’ plan is not enough to cover a permanent and complete repeal of the $ 10,000 cap on write-off.
A complete repeal of the SALT cap would cost around $ 385 billion, according to an estimate from Representative Tom Suozzi’s bill to restore tax relief. This means that Sanders’ proposal would cover less than a third of a full SALT cap cancellation for all taxpayers.
There are Democrats who could provide limited relief from SALT. Two of them are Andrew Cuomo and Phil Murphy. A Analysis 2016 tax data (cap before SALT) by the Tax Foundation found the SALT deduction to be the most lucrative as a percentage of adjusted gross income in New York and New Jersey. In fact, of the ten states where the SALT deduction was the most lucrative, nine are currently governed by Democrats (Maryland is the only exception). If the governors of the blue states didn’t tax their residents so much, taxpayers wouldn’t have to deduct more than $ 10,000 in state and local taxes on their federal returns.