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Democrats Trying to Cut Taxes for the Wealthy?

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Sen. Charles Schumer, (D-N.Y) makes opening remarks during a hearing, in Washington, D.C., Jan. 20, 2016. (CBP Photo by Glenn Fawcett)

Democrats are working hard to cut taxes for the wealthy. Yes, you read that correctly.

While Democrats are normally found calling for raising taxes on the wealthy, that isn’t the case for many when the wealthy taxpayers affected are also major campaign donors.

The cap on the State and Local Taxes paid (the SALT cap) set in place by the 2017 Tax Reform hit wealthy people in high tax states the hardest. Wealthy residents from places like California, New York, and New Jersey saw significant tax increases. Those high tax states happen to be home to many of the Democratic Party’s biggest donors.

Immediately following the passage of the SALT cap Democrats began efforts to get it repealed and cut taxes for the wealthy. Now they think they might be on the verge of doing just that. The Washington Examiner’s Zachary Halaschak reports:

Democratic leadership outlined plans Monday to bypass GOP filibusters to alter the cap on deductions for state and local taxes paid, a tax break largely for the wealthy opposed by most Republicans and some Democrats.

The fiscal 2022 Senate Democratic budget proposal released on Monday calls for “SALT cap relief” among its sweeping measures. While the budget is not legislation and is not binding, approving it would unlock a legislative process that would allow for Democrats to enact legislation with a simple majority in the Senate, meaning that Republicans could not block it using the filibuster.

The proposal comes after vocal advocates in the self-described “SALT caucus” pushed for changes to the tax code. A $10,000 cap on the SALT deduction, which largely benefits high-income households, was imposed by Republicans as part of the 2017 Tax Cuts and Jobs Act, which was signed by then-President Donald Trump.

Members of the SALT caucus, which include both Republicans and Democrats, hail from high-tax states and argue that the cap doesn’t just affect wealthy people because of the cost of living in their districts, although the Tax Policy Center found that only 3% of middle-income households would pay less in taxes if the cap is removed.

“This group is going to work together to educate people about how the middle class in my district or in many of the districts here is very different from the middle class in other districts in the country,” said Rep. Tom Suozzi, a New York Democrat and co-chairman of the SALT caucus, in April.

Raising the SALT deduction cap has faced opposition among some lawmakers. GOP Sen. Pat Toomey of Pennsylvania and other lawmakers have argued that the change would force low- and middle-income people to subsidize wealthy individuals in high-tax states and municipalities.

Action Line: If this repeal passes, middle-class Americans in high tax states will be on the hook to subsidize the tax breaks going to their wealthier neighbors. If your state’s leaders are trying to force you to pay higher taxes so your billionaire neighbor doesn’t have to, it’s time to look for a better America.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.