For all their talk about increasing taxes on the rich, the Democrat's budget reconciliation plan might actually result in a tax cut for high-income households. The latest addition to their reconciliation bill is a provision to raise the cap on state and local tax (SALT) deductions from $10,000 to $72,500 for ten years.
A new analysis from the nonpartisan Citizens for a Responsible Federal Budget (CRFB) found that including this ten-year SALT cap increase would cost "roughly $300 billion through 2025, with roughly $240 billion going to those making over $200,000 per year." In fact, CRFB says this giant tax cut for the rich is now one of the most expensive parts of the Build Back Better plan.
Why are the Democrats pushing this tax cut for the rich? Because a SALT cap repeal would overwhelmingly benefit high-earners from the progressive states they represent. One study found that more than 50 percent of the benefits of a full SALT repeal would go to taxpayers in just four states: California, New York, New Jersey, and Illinois. And a SALT cap increase would likely do the same. What do these states all have in common? Progressive governance and some of the highest state and local taxes in the nation.
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