After months of vowing to pay for President Joe Biden's big spending bill with tax hikes on the wealthy, high earners may walk away with a big tax cut, Insider reports.
Democrats proposed partially rolling back the 2017 Trump tax cuts on the wealthy and corporations to pay for Biden's spending agenda, which includes an extension of the Child Tax Credit, climate spending, child care, and affordable housing.
But Arizona Sen. Kyrsten Sinema, a crucial vote in the 50-50 Senate, killed the measure in negotiations, opposing any rollbacks to the Trump tax cuts despite voting against them in 2017.
One part of the Trump tax law still on the chopping block, however, is a cap on how much mostly wealthy people in a handful of high-tax blue states can deduct from their federal taxes.
The tax law capped the amount of state and local taxes people can deduct at $10,000. Some Democrats viewed the measure as punitive because it especially hit higher earners in blue states like California, New York, and New Jersey.
Democrats can't afford to lose many votes in Congress, meaning that a rollback of the cap is likely to make it into the final bill.
Big tax cut for the rich:
The House has proposed raising the SALT cap from $10,000 to $80,000 through 2026.
Such a move would provide the wealthy with a tax cut that's 10 times larger than the child tax credit expansion, according to the nonpartisan Committee for a Responsible Federal Budget.
Families earning up to $50,000 would receive $2,600 from the credit over a single year while those earning over $1 million would get an annual tax cut of $25,900.
Marc Goldwein, the senior policy director at CRFB, called the proposal “baffling.”
"SALT-cap repeal would be the single or the second largest individual item in Build Back Better," he told Insider. "And it goes entirely to the rich. Ninety-eight percent of the benefit goes to people that are making six, seven figures or more."
Bill may face changes:
The House proposal has also met pushback in the Senate.
Budget Chairman Bernie Sanders and New Jersey Sen. Bob Menendez are working on a counterproposal that would raise the cap entirely but only for those that earn up to $400,000 to $550,000.
Sanders called the House proposal “beyond unacceptable.”
"At a time of massive income and wealth inequality, the last thing we should be doing is giving more tax breaks to the very rich. Democrats campaigned and won on an agenda that demands that the very wealthy finally pay their fair share, not one that gives them more tax breaks," Sanders said.
"I am open to a compromise approach which protects the middle class in high tax states. I will not support more tax breaks for billionaires," he added.
