The comprehensive law on social spending and climate that the Democrats passed in the House of Representatives on Friday morning includes a temporary lifting of a Trump-era limit on the state and local government VAT Deduction – a policy that would bring huge profits to the rich while it would be of almost no benefit to middle class Americans.

That emerges from a new analysis released Thursday by the left-wing Urban Institution Tax Policy Center, which examined two separate plans by Democrats to raise the so-called SALT withdrawal cap from the current $ 10,000 threshold.

President Biden’s House version of the Build Back Better plan would increase the amount of state and local taxes that Americans can deduct from their federal bills to $ 80,000.


Meanwhile, Senate Democrats – led by Vermont’s Bernie Sanders and New Jersey’s Bob Menendez – are striving to limit the tax break on income, making it unlimited for those with an income of about $ 400,000, and beyond that amount and warn that the House of Representatives plan could be a boon to wealthy Americans.

However, analysis by the Tax Policy Center shows that both plans would ultimately benefit the top tier of US households.

“The plan that Sanders, Menendez and other Senate Democrats are developing would be only a modest improvement on the House of Representatives SALT cap of $ 80,000,” wrote Howard Gleckman and Len Burman of the Tax Policy Center in a blog post. “The House of Representatives plan would bring huge profits to the very wealthy. The Senate would limit its profits to the rich.

About 94% of the benefits on the House’s SALT plan would go to the top 20% of earners, or those who make about $ 175,000 or more. On 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, 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 break down their deductions.

“Any proposal would encourage a relatively small number of these households to become breakers,” says the analysis. “But even for them, their tax savings would be small.”