Democrats push tax break for high-income earners in last-minute social spending package revision

In a late Thursday night revision to President Biden’s social spending package, Democrats included a provision that would raise the itemized deduction cap for state and local taxes (SALT), a move analysts argue will only benefit high-income earners.

Under the Trump administration, the SALT cap was set at $10,000. And lawmakers from coastal states, like New Jersey and California, argued the cap unfairly targeted their constituents whose cost of living was already higher. 

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The new proposal would boost the SALT cap to $80,000 allowing high-income earners to more easily itemize property, sales or income taxes already paid to state and local governments.

The extended cap would only last through 2030 and snap back to the $10,000 limit in 2031.

"We have been fighting this unfair, targeted tax since its inception in 2017," New Jersey Democratic Reps. Josh Gottheimer, Mikie Sherrill and Tom Suozzi said in a joint statement Friday. "This agreement to address the cap on our State and Local Tax (SALT) deduction will effectively eliminate the undue burden for nearly all of the families in our districts who’ve been unfairly double taxed for the last four years."

The lawmakers championed the move as a win for "hardworking, middle-class families" in their districts, though according to a Tax Policy Center analysis, only Americans earning in the 90 to 99th percentile will see a difference come tax season. 

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More than half of Americans making between $254,000 and $366,000 would see a tax break under the new deduction limit, while roughly 75 percent of Americans earning between $366,000 and $867,000 would also see their tax bill reduced.

If the proposal passes Democratic muster in the House and Senate, Americans who itemize deductions will be able to write off up to $80,000 for property and state income taxes. 

"We’re confident that with this agreement, we can move forward on this crucially important package, and we will continue working to ensure that this tax cut gets signed into law to deliver this relief to our constituents as soon as possible," the New Jersey lawmakers said.

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The move to include the measure in the bill has been seen as a concession to moderate Democrats who have condemned the Trump-era SALT limitations. 

It remains unclear how progressive Democrats will react to the tax adjustment.