At a time of massive income and wealth inequality, when the rich are becoming richer and working families are struggling, the job of Congress is to demand tax fairness for working families and to make certain that the wealthiest people in this country begin to pay their fair share of taxes.
Unfortunately, in 2017, the Trump tax plan, which was supported by every Republican, moved us in exactly the wrong direction. The vast majority of the tax breaks in that proposal went to the wealthiest people in our country and the largest corporations – the people who needed it the least – and resulted in a $2 trillion increase in our national debt.
One of the negative aspects of the Trump tax plan was to limit deductions on state and local taxes to $10,000. That resulted in millions of middle class and working class Americans being forced to pay more in federal taxes. That was a regressive and unfair proposal, and this Congress must rectify it.
Unfortunately, as some of you may know, a proposal has been recently circulating which would completely eliminate the SALT cap. While the $10,000 cap is much too low, eliminating the cap entirely would result in a massive tax break for the wealthiest families in this country. The multimillionaires and billionaires who own mansions in exclusive neighborhoods, and who can afford to make extremely expensive purchases do not need a tax break.
According to the Committee for a Responsible Federal Budget, a 5-year repeal, which is what some are talking about, would cost roughly $475 billion, with $400 billion of that tax cut going to the top 5% of households. According to this non-partisan organization, if this proposal were to go into effect, the top 5% would receive a net tax cut of $30 billion a year – even after including all of the other provisions to increase taxes on the wealthy that are currently in the Build Back Better Act.
At a time when Democrats are correctly demanding that the wealthy finally pay their fair share of taxes, it would be absurd and hypocritical to provide the richest people in the country with a massive tax break.
That’s not just Bernie Sanders talking. Jason Furman, President Obama’s chairman of the Council of Economic Advisors, recently tweeted, ‘My guess is the majority of Americans with a net worth of $50 to $300 million would get a tax cut under the Build Back Better plan with a full repeal of SALT.’ He concludes by saying ‘that’s obscene.’
So, if completely eliminating the cap on state and local tax exemption is regressive and unfair, what is the solution? The answer is obvious. We should eliminate that cap for families making $400,000 or less, not for millionaires and billionaires. And we should make that permanent. This would not only provide tax relief to millions of middle income and working class families, it would be deficit-neutral.
I was delighted to hear from Senator Menendez that he has a very similar perspective on this issue and our offices have agreed in principle on a compromise proposal that would eliminate the SALT cap on middle class families who need it the most and ensure that millionaires and billionaires don’t receive any of the benefit. Over ten years, this proposal would be deficit neutral and the Build Back Better Act would be fully paid for by demanding that the wealthiest Americans and most profitable corporations pay their fair share of taxes.
We have heard reports that the House bill may include a proposal to raise the SALT cap to $72,500 for all Americans, including the wealthy. This approach would cost over $50 billion a year and would provide 37% of its benefits to the top 1%. In my view, that is not an acceptable compromise. We should be substantially increasing taxes on the top 1%, not giving the wealthiest people in America a tax break.