Just two hours into the markup of Tax Reform 2.0 — the follow up bill to make the Trump tax cuts permanent — Democrats in the House Ways and Means Committee have offered their first amendment: tax cuts for the wealthy. More specifically, Democrats are trying to restore full state and local tax deductions, aka SALT. That would have been very good news for wealthy liberals, if they had succeeded.
The unlimited SALT deduction favored the rich who lived in states like California and New York. The deduction allows taxpayers to subtract the state and local taxes from their federal tax bill, and it is used overwhelmingly by the wealthy. Analysis by the Tax Foundation shows that 88 percent of the benefits go to individuals making more than $100,000. Without the deduction, it makes living in a blue state with high taxes manageable.
Republicans capped the deduction at $10,000 in last December’s tax bill. Before that, the deduction was unlimited, and it was a boondoggle. When high tax states lessen the federal tax bill of their citizens, lower tax states inevitably have to pick up the slack. The SALT deduction sets up a system where North Dakota essentially subsidizes New York, and that isn’t fair.
It is also incredibly telling. Democrats always complain that Republicans just want to give a handout to the ultra-wealthy. Then on Thursday, Democrats turned around and, you guessed it, tried to give a handout to the ultra-wealthy.
It turns out that Democrats’ real objection to the tax bill all along was that it curbed a deduction that only wealthy people took.
