With slim majorities in the House and Senate, Democratic lawmakers have a prime opportunity to get their pet projects passed thanks to President Joe Biden’s $2 trillion “infrastructure plan.” And it’s an opportunity that Rep. Tom Suozzi of New York isn’t passing up. He’s threatening to vote against the bill unless Democrats accept his demand to pass a tax break that would benefit the wealthiest taxpayers while making the rest of the country pick up the bill.
Suozzi wants the full state and local tax deduction included in the president’s infrastructure bill. The SALT deduction allows wealthy people who itemize their deductions to write off their state and local taxes, primarily their property taxes, from their federal income taxes. The deduction is currently capped at $10,000, thanks to the 2017 tax law.
While Suozzi and his fellow Democrats claim that uncapping the deduction will benefit middle-class taxpayers, prevent high-income earners from moving out of high-tax states, and help local governments fund local services, these claims are more myth than reality.
No matter what congressional Democrats might claim, the SALT deduction does not help middle-class taxpayers. It makes them pay for it in the form of higher taxes in the present and future.
An uncapped SALT deduction is simply one big subsidy for wealthy people. If the deduction was uncapped, 57% of the benefits would flow to the top 1%. In fact, 25% of the benefits would flow to the top tenth of the top 1%, according to the left-of-center Brookings Institution. This would give these rich taxpayers an average tax cut of $33,100 and $145,000, respectively.