“I think it’s a giveaway for the rich,” she told reporters last month. “So I don’t believe in taking the entire infrastructure package hostage to completely remove it and remove the cap. I think we can talk about politics, but it’s an extreme position to be honest. “
There is no debate that the SALT deduction goes mostly to wealthier taxpayers. According to an analysis by the Institute for Taxes and Economic Policy in Washington, around 85 percent of benefits go to the richest 5 percent of households. If the cap were lifted, about two-thirds of the benefits – about $ 67 billion – would go to families who earn more than $ 200,000 a year.
How exactly this is distributed is subject to an overlapping cross-flow of tax policies, the effects of which vary from place to place. Since the 2017 tax cut largely lowered taxes even for residents of high-tax countries, the $ 10,000 cap meant wealthy people in blue states had smaller tax cuts than cheaper red states.
The political bottom line, however, is that capping a very visible benefit angered the kind of voters high-tax countries rely on – families in a place like Long Island or Orange County, California who could earn six-figure income own a home and pay tens of thousands a year in state income and local property taxes. In the psychology of tax paying, saving slightly less seems worse than no saving at all, especially if you feel singled out, as the blue-state taxpayers clearly did.
Giveaway or not, there is political logic in trying to restore unlimited utility. Wealthy suburban voters helped Mr Biden win the White House, and there is even evidence that the anger over the lost pullout helped Democrats move a handful of Republican seats in the 2018 election.
Although the debate affects the democratic districts disproportionately, SALT is less about red partisanship than about representing voters from affluent areas with high housing costs. The handful of Republicans who voted against the 2017 tax cuts did so mainly because of the loss of tax breaks like SALT, and today Representative Young Kim, a California Republican from Orange County, supports the lifting of the cap.
There is also little doubt that the cap falls much harder on blue states. Before the 2017 tax cuts, the average SALT withholding in New York was $ 22,169 – double the national average of $ 10,233 – according to the Government Finance Officers Association. Connecticut was $ 19,664, California was $ 18,437, and New Jersey was $ 17,850.