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Biden's spending bill could contain a big tax cut for the wealthy

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Posted at 2:33 PM, Nov 12, 2021
and last updated 2021-11-12 16:35:59-05

WASHINGTON, D.C. — In Washington, DC, the buzz of the town is President Joe Biden’s Build Back Better bill. But one thing that’s not being talked about is something called SALT.

“The problem is, this policy is very, very expensive and regressive,” said Maya MacGuineas, the president of the non-partisan Committee for a Responsible Federal Budget.

MacGuineas has been very focused on SALT in recent weeks.

So, what is SALT? Clearly, we're not talking about the table seasoning, but "state and local taxes" and deductions you may or may not be able to take on your federal tax return. Before 2017, there was no limit on how much of the state and local taxes an individual paid that they could deduct from the federal tax return but in 2017, former President Donald Trump’s tax cuts changed that.

“You add all those state and local taxes together and they were capped at a deduction of $10,000,” said Sharon Lassar, the director of The School of Accountancy at the University of Denver.

She has been following the news around SALT and the bill. The most recent proposal would increase the SALT cap from $10,000 to more than $72,000, reducing the overall tax burden for some.

“In this package, 80% of the benefits go to people making over $200,000 per year,” said MacGuineas. “This is not the targeted low-income people that a lot of people expect in this bill.”

So, who exactly benefits from the SALT cap repeal? It’s individuals with high incomes in states with high-income taxes. So, think New York, New Jersey, and California.

“The average person probably doesn’t pay more than $10,000 in state and local taxes,” said MacGuineas. “About 50% of this is going to the very richest 1% and they, on average, would be getting an annual tax break of over $35,000.”

A big advocate for the removal of the SALT cap is Rep. Thomas Souzzi from New York. He recently said in a statement, “This fix will put money back in the pockets of hardworking, middle-class families in our districts,” but would not respond to our requests for an interview.

One thing to keep in mind: no text draft of this bill has been released to the public yet. So, we are only getting this from people working on the bill.