The Daily Escape:
Bear Canyon, Tucson AZ – October photo by Carla Mitchell
Way back in 2020 (remember 2020?), Democrats campaigned on raising taxes on the rich. It’s still something that polls show a majority of Americans want. But House Dems are now proposing to raise the state and local tax (SALT) deduction, rather than eliminate it. The SALT tax limitation was one of the few responsible measures in the GOP’s 2017 tax-cut bill since it raised revenue mostly from wealthy people.
Wrongo lives in a state where the federal limitation of $10k on SALT taxes leaves him paying additional federal taxes. But most Americans are not impacted by the current limit on SALT deductions. Increasing it would primarily benefit America’s high income earners plus some middle class urban and suburban homeowners.
The WaPo was unhappy with the Dems new proposal:
“House Democrats released Wednesday a new draft of their big social spending and climate bill — tucked inside of which was a massive new payoff to wealthy people. The Democrats’ bill is supposed to make the nation fairer and more competitive. This cynical, wasteful policy should have no place in it.”
A handful of Democrats from Blue states say they will oppose Biden’s major social spending bill if it fails to include SALT cap “relief.” Once again, the fault lines within the Democratic Party are visible. Pelosi is in a bind. Refuse the demands for repeal of the SALT cap, and Dems won’t have the votes to pass either Biden’s big bill or the infrastructure bill. And since they already have a problem finding new revenue to offset the costs of their programs, so this will make that job a little harder. More from WaPo:
“Under the House plan, the amount of state and local taxes people can deduct would rise from $10,000 to $72,500. This gives high-income people a $23,000 tax break. The Tax Foundation, a think tank, estimates that 70% of the tax change would flow to the people making $250,000 or more. The Committee for a Responsible Federal Budget reckons that the plan would cost $300 billion, which would make it the third-most costly item in the bill — far more than it would devote to major anti-poverty programs.”
No one who owes $72,500 in state and local taxes is middle-income, but the SALT deduction does help many in the middle class, at least in the Blue states. Since most Blue states are also high tax states, not having a limitation literally saves $ thousands in taxes for some in the middle class. It had been that way for decades until the GOP capped it in 2017 and gave that money to the rich by lowering their taxes.
Finally capping the SALT hurts the resale possibilities for some otherwise modest homes in high tax areas. They’re not going to appeal to a purchaser when the mortgage payment is about the same as the tax payment every month. When a new buyer can’t completely deduct all of their property tax and local income taxes, it can make even a modest home look like a bad financial decision.
Sens. Robert Menendez (D-NJ) and Bernie Sanders (I-VT) unveiled an alternative plan that would keep the SALT cap, but exempt people who make less than $400,000 per year. That seems like a good idea. The House can repeal the SALT cap for those earning under $400,000 bringing it in line with the rest of Biden’s tax plan. This would help some in the middle class, although passing the Biden tax reform is still necessary.
It’s Saturday, and therefore, time for us to put away our concerns about what happened in Virginia or whether Manchin is simply a time-waster. And let’s calm ourselves as we kick off the weekend. It’s time for our Saturday Soother.
Here in CT, it was 29° Friday morning, making it three mornings of frost in a row. Our snowblower is coming back from the repair shop, and most plants are beginning their winter dormancy. At the Mansion of Wrong, we’ve finished repairs to our bluestone walkway.
With a cold, clear weekend on tap, we all should bundle up and sit in a comfy chair by a window. Today, let’s start with a hot steaming cup of Toasted Coconut coffee ($18.99/12oz) from BD Provisions in New Milford CT.
And after another tough week, let’s watch and listen to Sting perform “If It’s Love” from his 2021 album “The Bridge.” This song will put you in a good mood. And the dancers are wonderful. Watch it!
