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Democrats face a minute of truth: will they offer millionaires a tax cut?

WASHINGTON Democrats are rushing to pass their social spending and climate bill, the Build Back Better Act, before the end of the year, with some of the bill’s key tax provisions on hold.

A big question is whether the final version of the bill, the one ultimately passed by the Senate, delivers on years of campaign promises to raise the incomes of wealthy taxpayers – without also granting a tax cut. to millionaires and a political gift to Republicans.

“It’s bullshit that we even thought of any kind of tax cut for the rich in this area,” Rep. Tim Ryan (D-Ohio) told HuffPost. “I mean, the whole agenda here is to put money in the pockets of the workers and go after China.”

The problem is a federal deduction for state and local taxes that largely benefited the wealthiest taxpayers until Republicans capped it at $ 10,000 in the 2017 Tax Cuts and Jobs Act. While the tax cuts in this law favored high-income businesses and households, the limitation on the deduction resulted in a net increase in taxes for some wealthy households in heavily taxed blue states like New York, New York, New Zealand. Jersey and California.

The Build Back Better bill Democrats hope to pass in the House as early as Thursday night would raise the SALT cap to $ 80,000. As a result of this change, the comprehensive bill would give a net tax cut of two-thirds of millionaireseven with all of the other tax increases in the bill included.

Republicans wasted no time hitting Democrats over the proposal despite their general stance in favor of tax breaks for businesses and wealthy Americans. Senator John Barrasso (R-Wyo.) Said Democrats were giving “massive tax cuts to millionaires and billionaires in New York and California.”

“Democrats insist on giving a huge tax windfall to rich 1% of Americans by raising the reasonable cap on SALT,” Rep. Kevin Brady (R-Texas) added.

But the bill is almost certain to change in the Senate, where the senses. Bernie Sanders (I-Vt.) And Bob Menendez (DN.J.) have a counter-proposal: leave the deduction limit at $ 10,000 but create an exemption for households earning less than $ 400,000 per year.

“I think it’s bad policy, it’s bad policy,” Sanders told reporters Thursday, referring to the SALT provision of the House bill. “At the end of the day, we have to help the middle class, not the 1%.”

Senators Bernie Sanders (I-Vt.) And Robert Menendez (DN.J.) hold a press conference on National and Local Tax Deductions (SALT) as part of the Build Back Better reconciliation legislation at the U.S. Capitol United on November 3, 2021.

Chip Somodevilla via Getty Images

The Sanders-Menendez provision would exclude millionaires and the wealthiest 1% from using the deduction. The income limit would neutralize the “millionaire gift” criticism of the bill, although higher incomes will still receive most of the benefits of the deduction.

But Democrats who represent coastal states that depend on state and local income taxes to fund more generous government services, and where the cost of living is typically higher, argue their constituents are unfairly affected by the capped deduction. . Since high-income homeowners would be able to deduct their local and state property tax payments from their federal taxable income, local governments would be under less pressure to reduce their taxes on these households.

“In states like ours, which are a little more dependent on property taxes, the middle class is hit pretty hard,” Sen. Chris Murphy (D-Conn.) Told HuffPost. “I think there is a compromise here, but it is certainly not a problem exclusive to wealthy taxpayers.”

House Speaker Nancy Pelosi (D-Calif.) Also questioned whether millionaires would benefit from the bill’s changes to the deduction, saying on Thursday that the real beneficiaries would be residents of the states that use the proceeds. tax to provide social services.

“It’s not about tax cuts for the rich,” Pelosi said. “These are services for the American people in our communities where we have taken care of our people: education, transportation, health care, all the problems that public service brings to people have been reduced by the Trump administration,” and we’re shooting it’s over.

The House could vote on its version of the bill as early as Thursday or Friday depending on the publication of formal analyzes by the Congressional Budget Office and the Senate parliamentarian.

Representative Richard Neal (D-Mass.), Head of House tax policy, said he was unsure whether the Sanders proposal was gaining traction with House members who insisted on a complete repeal of the SALT limit.

“It’s hard to say because the margins are so tight here,” Neal told HuffPost Thursday. “It’s just really hard to say. It’s kind of back and forth.

Since Democrats control only 221 seats in the House and it takes 218 yes votes to pass legislation, they can only lose three and still pass Build Back Better.

Members most determined to rescind the SALT limit will not say what they think about the Senate’s alternative to the House bill.

“I’ll say something after the vote,” Rep. Tom Suozzi (DN.Y.), whose motto was “No SALT, No Deal,” told HuffPost.

Representative Pramila Jayapal (D-Wash.), Chair of the 95-member Congressional Progressive Caucus, said she believed the Senate alternative would prevail.

“I think the Senate will take care of it,” Jayapal said. “I think Senator Sanders and Senator Menendez have solutions.”


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