AP Photo/Alex Brandon
- Democrats are about to include a massive tax cut for the wealthy in their social spending plan.
- The plan could deliver much larger benefits to high-earners compared to middle-income families.
- Democrats argue that passage of the SALT cap in the Trump tax law was punitive to blue-state voters.
Rich Americans could come out much further ahead of middle-class families in President Joe Biden's $1.75 trillion social spending bill.
Congressional Democrats are trying to raise the total amount of state and local taxes that people can deduct from their overall tax bills, known as the SALT cap. The House legislation lifts it to $80,000 from it's current $10,000 cap through 2026, undoing part of President Donald Trump's signature tax law.
That measure alone will provide a tax cut to wealthy households that's 10 times bigger than the largest tax benefit for middle-income families earning $50,000 – the child tax credit expansion – per a new analysis from the nonpartisan Committee for a Responsible Federal Budget.
A middle-income family can expect to get in one year $2,600 in federal aid from the revamped child tax credit. That's in stark contrast to the $25,900 annual tax break that wealthy people earning above $1 million can expect from lawmakers raising the SALT cap.
The chart below from the organization reflects how benefits in the plan would be skewed towards higher-earners if Democrats approve SALT relief.
Marc Goldwein, senior policy director at the nonpartisan Committee for a Responsible Federal Budget, has called inclusion of the measure "baffling."
"SALT Cap repeal would be the single or the second largest individual item in Build Back Better," he said in an interview. "And it goes entirely to the rich. 98% of the benefit goes to people that are making six, seven figures, or more."
The House version of the SALT cap repeal is likely to undergo changes in the Senate. Sens. Bernie Sanders of Vermont and Bob Menendez are negotiating an alternative that could restrict who can receive the tax break to families earning somewhere between $400,000 and $1 million.
Democrats have long viewed the SALT cap as a punitive measure targeted at wealthier people in blue states like New York and California. "This is about punishing blue state voters," Sen. Ron Wyden, chair of the Senate Finance Committee, recently told Insider.
Still, the move is already exposing Democrats to a barrage of attacks from Republicans.
"I don't understand why Democrats seem to be hell-bent on what will be a huge tax windfall for the wealthy," Rep. Kevin Brady, the ranking Republican on the House Ways and Means Committee, said in a Fox News interview on Monday. "Lifting it is a hundred-billion-dollar giveaway to the wealthy a year."