Republicans are stepping up their criticism of the Democrats’ massive social spending and climate package, targeting a key tax regime that they say would benefit ultra-rich Americans in blue states disproportionately.

A group of Democrats from high-tax countries such as New Jersey and New York have been pushing for months to end the Trump-era federal and local tax deduction limits entirely as part of President Biden’s $ 1.75 trillion “Build Back” plan Better “. . The so-called SALT withholding cap, slated to expire in 2026, limits the amount of state and local taxes that Americans can deduct from their federal taxes to $ 10,000.

The proposal was rejected by both progressive lawmakers and Republicans, who labeled it a tax cut for millionaires and billionaires.

“Democrats always want you to believe that they always worry about the middle class,” Senator Chuck Grassley, R-Iowa, said last week. “Well, at this particular time, ‘Build Back Better’ really stands for ‘Blue State Bailout for Billionaires’.”


Undecided on the details of the provision, the Democrats have tabled two distinct proposals: A house version would raise the amount of state and local taxes that Americans can deduct from their federal bills to $ 80,000. It would be retroactive to 2021 and then reintroduce the $ 10,000 cap from 2031.

Meanwhile, Senate Democrats – led by Vermont’s Bernie Sanders and New Jersey’s Bob Menendez – are seeking to limit the income tax break so that it is unlimited for those with incomes of about $ 400,000 and beyond that amount Could be lowered and warn that the plan of the house could be a boon to wealthy Americans. (The Senate’s plan appeared to stall last week when Sanders sought a lower withdrawal cap to raise money for the Medicaid expansion.)

Eight Republican senators held a press conference last week to highlight the distributive power of the proposal and accused the Democrats of supporting a measure that primarily benefits the rich. GOP lawmakers passed the Tax Cuts and Jobs Act in 2017, which lowered the corporate income tax rate to 21% and individual income taxes for most Americans, including the very rich.

“This is Robin Hood in reverse,” Senator John Cornyn, R-Texas, said at the news conference. “It’s about taking low-income Americans and giving money to the richest. What the Democrats are trying to do in a terrifying display of hypocrisy is for ordinary working-class families to subsidize the richest Americans who live in these deep blue states and big cities . ” Areas across the country. “

One recently analysis edited by the left-wing Urban Institution Tax Policy Center, found that either proposal would generate tremendous profits for the wealthy while would be of almost no benefit to middle-class Americans.

About 94% of the benefits on the House’s SALT plan would go to the 20% of earners who make about $ 175,000 or more. In the Senate plan – which offers unlimited perks for anyone making less than $ 400,000 – about 88% would go into the top fifth of households.

The biggest difference between the plans is how much the wealthiest people would benefit from them. The House plan, which raises the cap to $ 80,000 with no limit for five years, would result in a third of the benefit going to the top 1% or those making nearly $ 870,000 or more. The top 1% would only get 0.1% of the benefit if the SALT cap of $ 10,000 is gradually restored, starting at $ 400,000.


Middle-income households would get an average tax cut of about $ 20 from both proposals in 2021 – largely because only about 10% of taxpayers actually itemize their deductions.

The Democrats have defended the lifting of the SALT deduction, dismissing criticism from Republicans, noting that the GOP tax bill has also lowered taxes for some of the richest Americans.