Salt cuts benefit the rich, divide the Democrats

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Salt cuts benefit the rich, divide the Democrats

WASHINGTON — A plan by House Democrats to slash taxes for high earners in their $1.85 trillion social policy spending package in states like New Jersey, New York and California is becoming an early political albatross for the party, Republicans first. Since then the Democrats have been mobilized to accuse. His populist theories in favor of cutting taxes for the rich.

The criticism offers a preview of emerging battle lines ahead of next year’s midterm elections and underscores the challenge Democrats face when local politics clash with the party’s national ambitions to promote economic equality. For Republicans who have defended their 2017 tax cuts that have benefited the wealthy, the Democrats’ proposal to raise the limits on state and local tax cuts is a way to reverse the script and cast the Democrats as the party of plutocrats. have the opportunity.

Texas Representative Kevin Brady, the top Republican on the House Ways and Means Committee, said, “I think they’re struggling to maintain their support for taxing the wealthy, yet they’re going through a huge tax under the SALT cap.” Providing windfall.” Abbreviated as State and Local Taxes. “If your priority is the working family, make that a priority, not the rich.”

Republicans, looking for ways to finance their own tax cuts in 2017, limited the amount of state and local taxes that households could deduct from their federal tax bills to $10,000. Democrats in high-tax states such as New York, New Jersey and California have spent years promising to repeal the cap and are set to raise it to $80,000 by 2030, before lowering it back to $10,000 in 2031. The cap, which is currently set to disappear in 2025, then expire permanently in 2032.

The House resolution is likely to change in the Senate, where it has its own champions and opponents. Senator Chuck Schumer, New York’s Democrat and majority leader, has adopted more liberal cuts, while Senator Bernie Sanders, the Vermont independent who chairs the Senate Budget Committee, has sharply criticized the House proposal. He joined Senator Bob Menendez, a Democrat from New Jersey, in negotiating an income cap — up to $550,000, though that number is in flux — that could receive the cut.

This week, the National Republican Congressional Committee released poll data that said a majority of voters in battleground states would be less likely to vote for Democrats, who have taxed wealthy homeowners in New Jersey, New York and California. Reduction policy was supported. It said the Democratic Party would have to “defend its politically toxic policies that punish hard-working families in order to reward the liberal elite.”

Prominent tax and budget analysts have argued that extending the cuts is an unnecessary giveaway for the wealthy.

According to the Nonpartisan Committee for a Responsible Federal Budget, a family of four in Washington earning $1 million a year will receive 10 times as much tax relief from the state’s expansion the following year and as local as a middle-class family. Tax deduction will be received from another. Provision in social policy package, extension of child tax credit. Citing the non-partisan Urban-Brookings Tax Policy Center’s calculations, the group said that two-thirds of households making more than $1 million annually would receive a tax deduction under the law due to increased state and local estate tax deductions.

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The proposal has put some Democrats on the defensive.

Representative Jared Golden, Democrat of Maine, said this week that tax exemptions to millionaires looked like something Republicans might have come up with.

“Proponents Have Been Saying the BBB Taxes the Rich,” Mr. Golden said on twitter, referring to a bill known as the Build Back Better Act. “But the more we learn about SALT provisions, the more it looks like another huge tax break for millionaires.”

The issue is further complicating the passage of the bill, which Democrats are trying to get through both the House and Senate without Republican support. Given their slim majority in both houses, Democrats can lose no more than three votes in the House and none in the Senate.

Some Democrats in Congress of states with higher taxes have included more liberal cuts as a prerequisite for supporting the bill.

The chairman of the House Ways and Means Committee is Massachusetts Representative Richard E. “There’s a range of competing views on SALT, but I mean, it’s pretty clear that there has to be something in it, that’s for sure,” Neal said.

The unexpectedly tight race for governor of New Jersey was a clear reminder that the state’s high estate taxes — and the extent of their deductions — are high on the lists of voters’ concerns, strategists and other political observers.

“As Covid-like recurrences occur, taxes are taking their place as the top issue in New Jersey,” said Michael Duhaime, Republican political strategist for Mercury Public Affairs.

The SALT cap in the suburbs of New York City “essentially resulted in a huge tax increase for a lot of families”, Mr. Duhaime said. With Democrats in power, those homeowners are hoping for some relief, he said.

Now that former President Donald J. Trump is out of office, New Jersey has “returned to its means” of being deeply concerned about the state’s affordability, said Julie Rosinski, a strategist who worked with a Democrat, Gov. Murphy advised. His first campaign in 2017. The average homeowner in the state pays about $10,000 in property taxes, she said, with a limit of about one-third of New Jersey residents.

“I think this is absolutely a line in the sand that some of these vulnerable members of Congress need to draw,” Ms Rosinski said.

Strategists said many Democrats who represent affluent suburban areas, where most homeowners pay more than $10,000 a year in property taxes, will face tough challenges in the midterm elections next year. His short list of vulnerable House members includes Josh Gotheimer, Mickey Sherrill and Tom Malinowski of North Jersey, and Andy Kim, representing part of the Jersey Shore, all of whom support raising the SALT cap.

If Democrats can change the retroactive SALT deduction to cover 2021 taxes, they could campaign on providing incumbent tax cuts, Ms. Rosinski said. But if they fail, his Republican opponents – such as Thomas Keane Jr., a state senator challenging Malinowski – will be able to use it against him, she said.

“It may not play well in Vermont or the Alexandria Ocasio-Cortez district, but if you’re Nancy Pelosi, you understand that the majority of your road runs through suburban New Jersey and places like suburban California and suburban New York,” Ms. . Roginsky said.

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Ben Dworkin, director of the Rowan Institute for Public Policy and Citizenship at Rowan University in Glassboro, NJ, cited an unexpectedly close race for governor of New Jersey this year. He mentioned how effective Mr. Murphy’s rival, Jack Ciatarelli, was in playing with voters’ sentiments about the state’s higher taxes.

“He kept that issue in the house,” Mr Dworkin said.

He said public voting up to that election showed that affordability was the “top issue” in the state in general.

“From an elected official standpoint, anything you can do to reduce the pressure on taxes, as will the change in the SALT cap, is a huge benefit,” Mr Dworkin said.

Even one of the state’s leading Republicans, John M. Bramnick, the minority leader in the state legislature, said he would applaud Democrats if they provided some tax relief to New Jersey residents.

“If Gottheimer and Mickey stand up for Sherrill and other Republicans and get it done, I would say I’m with them and I’m proud of their work,” Mr. Bramnik said.

Mr Gottheimer said in an interview that people were migrating from New Jersey because the extent of the deduction meant an increase in the cost of living. He rejected criticism that raising the cap was a tax cut for the wealthy, arguing that was not the case in his state.

“My job is to fight for my district, and again if other states or districts don’t want it they don’t have to take it,” said Mr. Gottheimer. “If you come to my kingdom, it is a threat to existence.”

Yet the overall economic impact of the cap in high-tax states is not as clear as those who advocate raising it suggest.

Daniel Hemel, a law professor at the University of Chicago whose research has focused on taxes, argued that under the current proposal, millionaires would actually face higher taxes than they would otherwise in the second half of the decade.

And while he said liberals should be concerned that the law would mean some wealthy people would get big tax breaks, he argued that given the structure of their $1.5 trillion tax cut four years ago, Republicans were hypocritical in their attacks. Were.

“I think any Republican who voted for the 2017 tax law loses the ability to criticize liberals for regressive tax policy,” Hemel said.

Emily Cochran Contributed to reporting.

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