House Speaker Nancy Pelosi (California) defended attempts by some members of her party to include state and local tax deductions (SALT) during her weekly press conference, breaking her silence over the controversy.
SALT allows taxpayers to deduct state and local income taxes from their federal tax account. The program is particularly popular with legislators representing high-tax Democratic states such as New York, New Jersey, and California.
SALT has long been the backbone of the US tax code, but in 2017 it was significantly reduced by the Republicans.
Under the Republican Tax Cuts and Employment Act of 2017, which a majority of Republicans in Congress approved in a negotiation process under President Donald Trump, the SALT deduction remained, but was capped at $ 10,000.
Now that they have Congress, some Democrats are fighting fiercely to raise that limit or lift it altogether.
In the initial draft of their $ 3.5 trillion reconciliation bill, Democrats hoped to restore the deduction. But SALT was not included in the compromise budget bill drafted by President Joe Biden with Senate Moderates Joe Manchin (DW. Virginia) and Kyrsten Sinema (D-Ariz.).
Frustrated by this absence, supporters of the measure demanded that SALT be resumed, threatening not to support the law without a program.
Since the disclosure of the compromise budget, the Democratic leadership has been in constant negotiations with various wings of their faction that were unhappy with one aspect of the compromise or another.
However, Pelosi did not give her final opinion on the matter until Thursday during her press conference, where she broke her silence and defended the measure.
Republicans and proponents of progress argued that despite the Democrats’ claims that the rich would pay the bill, the SALT measure would have the opposite effect. Because states with higher taxes tend to have higher median incomes than other states, the benefits of the SALT deduction, critics say, will go mostly to the rich.
Research by the Institute for Fiscal and Economic Policy seems to support this claim. The study said the program was “not worth its SALT” and found that the tax deduction “would be of great benefit to wealthy, white households.”
“The vast majority of families will not financially benefit from the tax waivers, and most of the tax breaks will go to families with incomes above $ 200,000,” the study said.
When asked about this criticism, Pelosi replied, “As a proponent of this particular measure, I just want to be clear about what this is about.”
“This is not about tax cuts for rich people,” Pelosi insisted, “but about services for the American people.”
State-level education, transportation and health initiatives funded by state income taxes have been “cut back by the Trump administration,” Pelosi said. “We’re just flipping it,” she added.
Pelosi continued, “It’s not who gets the tax breaks, but which states get the income they need to meet the needs of the people.”
“I will continue this fight,” she promised.
Unsatisfied with the response, the reporter posed a question, noting that despite other benefits, one of the effects of the SALT recovery would be tax cuts for the rich.
Other Democrats say salt is too beneficial for the rich
“No, this is not a result. It’s not a result, ”Pelosi argued. “The fact is that the dynamism that is invested in our states – for the people – is what is important here.”
However, the controversy over SALT, like many other programs in the spending bill, continues to divide the Democratic faction in both chambers.
According to one plan presented by the Household Rules Committee, the SALT ceiling will be increased to $ 72,500, more than seven times the current level.
But moderately inclined Senator Bob Menendez (DN.J.) and progressive Senator Bernie Sanders (I-Vt.), Both of the high-tax northeastern states, criticized the plan, arguing with Republicans that it would overwhelmingly affect the wealthy.
While Sanders admitted that raising the cap to $ 72,500 is better than changing nothing at all, he said the Rules Committee’s proposal was “still quite regressive.”
It is unlikely that the moderate and progressive duo are instead working on a proposal that would keep SALT capped at $ 10,000 but grant exemption to taxpayers earning less than $ 400,000.
This alternative proposal would completely free about 98 percent of New Jersey voters from the restriction, Menendez said.
And despite strong support for Pelosi’s program, some progressive participants in the 95-member progressive congregation agree with Sanders that the budget should not include provisions that will primarily benefit the rich, as analysis shows that increasing the SALT cap will.
Negotiations on limiting SALT are ongoing, and it is not yet clear what the program will look like in the final draft of the bill.
However, due to their razor-thin majority in both houses, Democrats will need the support of all but three members of the House and the support of all 50 Senate members to make any change to the deduction through a larger bill, which is difficult. task as the problem continues to split the lot.