Congress is considering another big tax cut for the rich. Of course, since it’s Democrats suggesting this tax cut, said cut is wrapped up rather differently than usual.
The SALT cap repeal is presented as making the system fairer so that people don’t pay tax twice on the same incomes, etc. But it’s the Democrats’ voting rich who will get this tax cut in outsize numbers. The basics of SALT are that one can deduct state and local taxes from income when filing federal taxes. So, if a person lives in a high-tax state, normally Democratic-run states, and he or she has a high income, then this is a very valuable deduction. State taxes in New York can be as much as 14% of income. California is not much different.
Former President Donald Trump thought this wasn’t quite fair. All rich folks, all those earning enough not to take just the standard deduction, should be paying the same amount of their income to the federal government. The deduction is thus limited to $10,000 now. It is this change that Democrats are talking about reversing.
But if Democrats do repeal the SALT cap, the tax revenue loss could range from $185 billion to $600 billion — a pretty big tax cut! Near all of the benefits would go to the top 10% of earners. The top 1% of earners in relevant states would see a nearly 3% rise in their incomes.
We shouldn’t be too hard on Rep. Tom Suozzi, who is selling this in Congress. He is, after all, just fighting for the interests of those in his district, and that’s what he’s there for. The question is whether the rest of us should offer even the slightest support for what Suozzi is suggesting.
A massive tax cut for the rich in Democratic strongholds? No.
