Expanding SALT tax loophole appears to be dead | EDITORIAL

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Democrats have repeatedly tried to secure a major tax break for the wealthy, but it appears their efforts will not be successful.

Late last month, The Hill reported that Senate Democrats discarded their push to expand the state and local tax deduction – known as the SALT delisting – from a revised version of the Build Back Better Act. Senate Democrats still believed they could drag West Virginia Sen. Joe Manchin on for another round of massive spending if they cut the cost of the bill. Again, however, they misinterpreted their colleague. On Tuesday, Mr Manchin told CNN the Build Back Better Bill was “dead”.

This should spell the end of the SALT deduction, a benefit for high earners in high-tax states. Prior to the 2017 Republican tax reform, filers could deduct all of their state and local taxes on their federal returns. But the Tax Cuts and Jobs Act limited that deduction to $10,000.

That was bad news for high earners in blue states like California and New York. Paying state income tax of 10% or more hurts. Being able to deduct this payment from his federal taxes took some of the sting out of it, especially for those with a marginal tax rate of 35% or higher.

Democrats in high-tax states worried that without the deduction, taxpayers would begin to demand lower levies or even move to red states. The obvious solution would be for states to roll back punitive tax rates, but Democrats have instead pushed frantically to restore this tax loophole for the wealthy.

It’s funny, considering that Democrats constantly claim they want the rich to pay their “fair share.” Yet they were more than happy to offer this particular tax break to the wealthy because it helped subsidize the costs of tax profligacy in progressive states.

The Brookings Institute from left find that the top 20% earners would receive 96% of the benefits of lifting the cap on SALT deductions. The most maligned 1% would receive 57% of the profits.

Even top Democrats, including Senate Majority Leader Chuck Schumer and Speaker Nancy Pelosi, supported restoring SALT. It turns out that their class struggle rhetoric is more about politics than principle. Who knew?

Senator Schumer once called Mr. Trump’s tax plan “regressive.” He claimed it was “a tax break for millionaires and billionaires, paid for by looting the pockets and health care of middle-class Americans.” He might as well have talked about his own SALT plan.

Senator Schumer and the Democrats may not have succeeded in their quest to give the wealthy a nice tax break. But they showed the country their enormous hypocrisy.

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