In a revision of President Biden’s social spending package late Thursday evening, Democrats included a provision that would increase the breakdown of the state and local tax deduction ceiling (SALT).
Under the Trump administration, the SALT cap was set at $ 10,000. And lawmakers from coastal states like New Jersey and California argued that the cap was wrongly targeted at their voters, whose cost of living was already higher.
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The new proposal would raise the SALT cap to $ 80,000 and allow high earners to more easily break down property, sales, or income taxes already paid to state and local governments.
The extended cap would only last until 2030 and drop back to the $ 10,000 limit in 2031.
“We have been fighting this unfair, targeted tax since it was introduced in 2017,” New Jersey Democratic MPs Josh Gottheimer, Mikie Sherrill and Tom Suozzi said in a joint statement on Friday. “This agreement to remove the State and Local Tax Withholding Cap (SALT) will effectively remove the undue burden on nearly all families in our counties who have been wrongly double-taxed over the past four years.”
Legislators defended the move as a win for “hard-working middle-class families” in their districts, though, according to an analysis by the Tax Policy Center, only Americans earning in the 90th to 99th percentiles will see a difference in the tax season.
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More than half of Americans who earn between $ 254,000 and $ 366,000 would get tax breaks under the new deduction limit, while about 75 percent of Americans who earn between $ 366,000 and $ 867,000 would also have their tax cut reduced .
If the proposal passes the pattern of the Democrats in the House and Senate, Americans, breaking down the deductions, can write off up to $ 80,000 in property and state income taxes.
“We are confident that with this agreement we can advance this extremely important package and we will continue to work to ensure that this tax cut is signed into law to bring this relief to our voters as soon as possible,” said the New Das said the Jersey legislators.
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The move to include the measure in the bill was seen as a concession to the moderate Democrats who condemned the Trump-era SALT restrictions.
It remains unclear how progressive Democrats will react to the tax adjustment.