December 2, 2022

Tax the rich? Maybe not. Democrats’ spending plan could be a tax cut for the rich, budget watchdog finds

1 min read

Democrats’ $1.75 trillion economic and climate bill could end up delivering a tax cut for the richest 5% of Americans, a new analysis finds.

The Build Back Better framework released by the White House last week calls for tax increases on the richest families, including a surtax on multi-millionaires and billionaires. Although it wasn’t addressed in the framework, some observers expect the package will eventually include a repeal of the $10,000 cap on the federal deduction for state and local taxes, known as SALT. Some Democrats have said they won’t vote for the legislation without action on the SALT cap, which has been a particular issue in California, New York, New Jersey and other high-tax states.

The bipartisan Committee for a Responsible Federal Budget found in an analysis released Friday that repealing the SALT cap would more than offset the planned tax hikes on the rich. “A two-year SALT cap repeal — if included — would reduce taxes on the top 5% of earners by over $70 billion” in fiscal 2023, the CRFB said. After factoring in the planned tax hikes on the rich, the package would translate to a $30 billion net direct tax cut for those in the top 5% when the SALT cap repeal is in effect, the analysis said.

The 2017 tax law signed by former President Donald Trump imposed a $10,000 limit on how much state and local taxes (including property taxes) that households can deduct from their federal taxes.