Democrats struck a chord with voters in the 2020 elections by campaigning on the need for the wealthiest Americans to pay higher taxes. Now the party is flirting with a major change in tax policy that would allow the wealthiest Americans to pay lower taxes.
A bloc of House Democrats, mostly from the New York area, are loudly withholding support for a broad package of tax increases to fund President Joe Biden’s infrastructure plan unless it also includes a tax cut: an unlimited deduction for state and local tax payments, or SALT.
In the narrowly divided House, it takes only a handful of Democrats to derail the president’s agenda by making common cause with do-nothing Republicans. In an open letter last week addressed to the House speaker, Nancy Pelosi, 17 of the 19 Democrats who represent New York threatened to do exactly that, writing that they “reserve the right” to vote against any tax increase that does not include a “full repeal” of the $10,000 limit on the SALT deduction, enacted in 2017.
A number of Democrats from other states, including New Jersey and California, have taken a similar stand. Rep. Josh Gottheimer of New Jersey held a news conference last week behind a lectern emblazoned with the logo “No SALT, no dice.”
Proponents of an unlimited SALT deduction say they are seeking to help middle-class taxpayers. If so, they should go back to the drawing board. The top 20% of American households, ranked by income, would receive 96% of the benefits of the change, according to a detailed analysis by the widely respected Urban-Brookings Tax Policy Center.