- An analysis of the Democrats’ big spending bill found the biggest dollar-value tax cut would go to the top 1%.
- Taxpayers making between $500,000 and $1 million are set to see an average tax cut of over $6,000 next year.
- The bill still raises taxes on the top 0.1%, with the average household making over $1 million paying over $65,000 more.
Democrats have talked a big game about paying for programs that help working families by taxing the wealthy, but the latest version of their plan would give a huge tax cut to most of the 1% of wealthiest Americans.
The top 0.1%, though? They’re going to get higher taxes.
Congressional Democrats have been endlessly fighting over their $1.75 trillion spending bill. Key to the proposal is its pay-fors, or tax changes that offset the costs of new spending. Democrats need centrist members’ support to pass the plan, and centrists like Sen. Joe Manchin demand the package be fully covered by new taxes.
One of the recently added provisions to the proposed law is an increase on the amount of local and state taxes you can write off as a deduction on your federal tax bill. The SALT deduction would predominantly help affluent taxpayers in high-tax states, as they are much more likely to be facing high local tax bills.
An analysis from the Tax Policy Center on the latest version of the bill shows that, while nearly all Americans making under $1 million will get a tax cut, those on the upper end of that spectrum – the merely rich making between $500,000 and $1 million – will see a much bigger dollar-value tax cut than the bulk of the working and middle class:
Of course, the bill still includes a pretty big tax hike on the very rich. The Tax Policy Center estimates that the average taxpayer with over $1 million in annual income will see an increase of about $65,000 to their federal tax bill:
The SALT deduction has become a new sticking point in already tangled negotiations. A bipartisan group of legislators known as the “SALT Caucus” has fought to repeal caps on the deduction. Key Senate Democrats have backed the movement as well. Republicans’ establishment of the caps in 2017 was “about punishing blue-state voters,” Sen. Ron Wyden told Insider’s Joseph Zeballos-Roig in November. The caps removed a tax break for high-earners in states with lofty income and property taxes.
Others fear repealing the SALT cap is an unnecessary move to help financially strong Americans. Giving more tax breaks to wealthy people is “the last thing we should be doing,” Sen. Bernie Sanders said in a November 2 tweet.
“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,” he added.
Other analysis suggests a SALT-cap repeal isn’t just a skewed benefit, but a very expensive one as well. Families earning between $50,000 and $150,000 could expect $2,600 per year from the extended child-tax credit included in the spending plan, according to the nonpartisan Committee for a Responsible Federal Budget. Conversely, households earning more than $1 million would rake in $25,900 every year from the SALT repeal.
The social-spending plan is expected to be fully paid for even with the SALT deduction. But as Biden touts the plan’s benefits for working Americans, the wealthy can look forward to a massive tax break.
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