Speaking of Build Back Better … Moderates on the left side of the Senate aisle and all senators to the right continue to insist the price tag is too much, despite Congress slashing the cost nearly in half to appease Congressional centrists.
Well, there’s one measure in Build Back Better that the Senate is welcome to take a machete to instead of whacking away at climate and social safety net proposals: an increase of the SALT deduction cap from $10,000 to $80,000.
The SALT (state and local tax) deductions, as The Dominion Post reported, permit taxpayers who itemize when filing federal taxes to deduct certain taxes paid to state and local governments. SALT taxes consist of property taxes plus state income or sales taxes (but not both, for deduction purposes), which are higher in wealthy blue states like New York, New Jersey and California.
Who uses SALT deductions? Elaine Waterhouse Wilson, a professor of law at WVU, said in an interview with The Dominion Post: “People who have big mortgages, people who pay a lot in state and local taxes which include property tax, and people who can afford to make a lot of gifts to charity. So in large, the itemizers tend to be on the higher end of income tax scale.” Specifically, she said, the top 20% of taxpayers, because their itemized deduction is more than the standard deduction the majority of people take.
To put in perspective, the Democrats widely condemned Trump’s controversial tax cuts for the rich, but that same legislation put a cap of $10,000 on previously unlimited SALT deductions. Pre-2017, wealthy individuals could deduct virtually all of their property taxes from their federal taxes, saving them a ton of money. As Waterhouse Wilson said, “However much you paid in state tax and however much you paid in property tax, you pretty much got that amount. You can imagine if you are a higher income taxpayer, that number could get very big very fast.”
Post-2017, they could only deduct up to $10,000. Under the new provision in Build Back Better, those same wealthy people could now deduct up to $80,000. Democrats in the House representing wealthy blue states slipped this not-so-little expense into the bill as a favor to their constituents.
Sen. Shelley Moore Capito and her Republican colleagues have pointed out the SALT cap increase is the second most expensive aspect of the $1.75 trillion plan, to the tune of $275 billion. For comparison, the combined cost of child care and universal pre-K is $300 billion.
It’s not so much money the government is spending as it is money the federal government won’t be bringing in. Although, according to H&R Block, a deduction “can result in a larger refund of your withholding.” Considering Democrats have touted Build Back Better as a bill for the average American that pays for itself, Republicans aren’t wrong to throw the word “hypocrisy” around.
As the Senate negotiates the finer details of Build Back Better before Christmas (and hopefully brings it for a vote), senators on both sides of the aisle should look to cut the SALT cap increase and restore measures that actually help the everyday people, like the dental coverage under Medicare and paid family leave that have already been cut.