Susan Knusen, mayor of Ridgewood, NJ, stood in front of a huge road salt mountain earlier this year and protested what she saw as one of America’s major tax injustices.
For almost a century, residents of towns such as Ridgewood have been able to deduct large amounts of state and local tax payments, or “salt,” from federal tax bills. After Donald Trump’s 2017 tax reform, the deduction was limited to $ 10,000.
In places like Ridgewood, where local property taxes average over $ 18,500 per household and help fund the town’s acclaimed schools, caps can hurt some residents. I gave it.
So last week, US President Joe Biden and Democrats reached $ 1.75 trillion in addition to achieving the party’s larger goal of strengthening the country’s social safety net and strengthening its response to climate change. By promoting the legislative package, Knusen’s spirit has become brighter. Salt caps will be $ 80,000 until 2025.
“This will be a relief for many,” said Josh, a Democrat, including Ridgewood and other high-tax towns in northern New Jersey, who drew a line in the sand above the salt.・ I praised Gottheimer. ..
But what feels like relief at Ridgewood feels fraudulent elsewhere, even to many Democrats. From Maine to Montana, party members are opposed to what they consider to be a $ 275 billion costly grant to the rich, making it the second largest element of Biden’s signed Buildback Better bill. ..
While the debate exacerbates the increasingly rivaling party rift between progressive and moderate factions, it further complicates the Build Back Better bill as it heads to the Senate after a rocky journey.
“A year ago, if I told me that the second largest part of this parliamentary signature bill was a $ 280 billion tax giveaway to millionaires, I said the Republicans were in charge. Let’s do it, “said Jared Golden. The party’s only house member, a Democrat in Maine, voted against Buildback Better.
According to an analysis by both a nonpartisan tax policy center and a financially hawkish responsible federal budget think tank, 94% of the benefits of increasing the salt cap to $ 80,000 are in the top five of the national earners. to go. Earn at least $ 175,000 a year, with 70% in the top 5%.
Vermont Senator Bernie Sanders salt We must ask Capitol Hill reporters to cap “bad politics” and “bad policies” and “start a fair tax burden on the wealthy, rather than giving them more tax cuts.” Said.
Jason Farman, a former economic adviser to then-President Barack Obama, criticized the previous move to completely abolish the cap as “obscene.”
Republicans, meanwhile, are pleased with the opportunity to absorb enough criticism of pushing for tax cuts in favor of the wealthy and ridicule the bill as a concession to wealthy Democratic campaign donors in high-tax states such as Newyork and California.
Mitch McConnell, a top Republican in the Senate, called it “a jackpot for the Blue States billionaires and millionaires.”
“They basically just point out the hypocrisy of the Democratic Party,” said Republican strategist Doug Hay.
The Biden administration responded and looked like a sheep. White House spokesman Jen Psaki told reporters that the president’s excitement for the package was ” Salt deductionIt’s about other important factors. “
But soothing voters in high-tax suburbs could be important for Democratic opportunities in next year’s midterm elections, said Howard Gleckman, an independent tax policy center.
“”[House members from high-income areas] If we can’t provide some kind of relief, we’re very likely to lose the election, “he said.” Losing a seat increases the chances that the Democratic Party will lose control of the House of Representatives. “
The ultimate fate of this clause is uncertain, as it requires the support of all 50 Democrats in the Senate. One of the possible amendments that Sanders and New Jersey Senator Robert Menendez are working on is to limit income-based deductions and create a potential cutoff for people who earn more than $ 500,000 a year.
Michael Hayes, a professor of public policy at Rutgers University, said:
Still, Hayes argued that the salt cap was more complicated than that. This is partly due to the large economic impact on areas such as housing prices and the construction industry.
Salt may seem awkward to some Democrats, but in places like New Jersey, it can feel virtually existential. The state averages $ 9,112 in 2020 and boasts the highest property tax in the country. In contrast, states, including Louisiana and Alabama, averaged less than $ 1,000.
Anger at Saltcap helped Democrats in New Jersey, such as Mikie Sherrill and Tom Malinowski, wipe out Congress, which was a Republican district in mid-2018.On the other hand, this month Governor election When a lesser-known Republican candidate partially overwhelmed and upset the incumbent Phil Murphy on this issue, he served as a jarring reminder of voters’ frustration with high taxes.
The fear of internal organs caused by the salt cap was that heavier tax burdens not only put pressure on the population, but also dented the high housing prices in the area. So far, that hasn’t happened. One reason may be that the pandemic hastened many urban dwellers to the suburbs.
“Honestly, I didn’t have a buyer to raise it,” said Claudi Ainoa, an agent at Keller Williams in Ridgewood.
According to Knusen, it was difficult to assess the impact of the salt cap in the midst of a historic pandemic and economic crisis. When people moved to Ridgewood, which was ready for Christmas in the quaint village center earlier this week, they understood the town’s proposal, the mayor said: in exchange for a prestigious public school. High property tax.
One of the reasons why taxes are so high is because of their asset value. As of October, the average home offer price was $ 872,000, up 11.5% from a year ago, according to Realtor.com.
Still, Knusen argued that it was a mistake to conclude that lifting the cap would only benefit the wealthy. “Not everyone here is rich,” she said. “There are many middle-income groups that have had an impact.”
“Tax Freebies to Millionaires”: Democratic “Salt” Plans Divide Party
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