When most news media and Democrats complain about “tax cuts for the rich,” they usually mean “tax cuts for everyone, which are more beneficial for people who pay higher taxes.”
I’m not exaggerating — that’s literally what their attack was on George W. Bush’s and Donald Trump’s tax cuts. Both cuts shifted the burden more disproportionately away from lower-income taxpayers and toward the wealthy, but every major outlet screamed to heaven this was some special tax cut for the rich.
Meanwhile, Democrats are advancing a large package of taxes and spending that includes actual special tax cuts that only help the rich.
Lower rates for everyone (what Republicans do) are tax cuts for everyone, and yes, they largely benefit the rich. Massively expanding the tax deduction for state and local taxes paid, on the other hand, is a tax cut only rich people get. Also, a $12,500 tax credit for buying plug-in electric vehicles is a targeted tax cut that goes almost entirely to rich people.
With these changes to the BBB text, a family earning $500k will be able to get the full $12,500 tax credit when they buy a $79,995 GMC Hummer EV2 SUV (625hp, 8,000+ lbs) in 2024. @greg_shill https://t.co/w8gVTXfK0t pic.twitter.com/uS5Hllictx
— Ryan Radia (@RyanRadia) November 4, 2021
Under current law, one can deduct one’s state and local tax payments, up to $10,000, from one’s income for the sake of calculating federal taxes. Democrats want to change that. Senate Majority Leader Chuck Schumer said in the 2020 campaign that removing that $10,000 cap would be his priority. Current Democratic legislation would raise that cap to $80,000.
Again, this isn’t a tax break for everyone. It’s a tax break for really, really rich people.
For starters, nearly 90% of U.S. taxpayers take the standard deduction, and so they don’t write off their state and local taxes at all. Sure, some portion of that 90% would itemize if they could write off more of their state and local taxes, but the marginal benefit of this would be tiny for anyone but the rich. Expert estimates found that eliminating the state and local tax deduction would give most of its benefits to the top 1% and almost all of its benefits to the top 10%.
The slightly mitigated tax cut for the wealthy Democrats are considering, which allows for the write-off of $80,000 of state and local taxes, doesn’t change the math too much. Just ask yourself this: Who the heck owes $80,000 in state and local income taxes?
Only rich people.
An $80,000 SALT deduction. The only households that will use that are millionaires, and I mean that almost literally.
This is a tax benefit of $25,900 per year for millionaire households compared to current law.
That money should be used to help families and small businesses. https://t.co/BMn6r7xI5K
— Ryan Ellis (@RyanLEllis) November 5, 2021
So remember that Democrats don’t mind tax cuts for the rich. What they hate is tax cuts for everyone. What they like is giveaways to rich people who do the right things, like live in high-tax states and buy Teslas.
