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Senate Democrats tried — and failed — to give a tax break to mostly wealthy people

Conservative Review

Almost two years after Democrats lambasted Republicans' 2017 tax cut bill as a giveaway, most Senate Democrats voted on a tax resolution that would mostly benefit high-income earners.

On Wednesday afternoon, the Senate rejected a proposal that would allow states to work around a portion of the 2017 tax law to help their residents avoid federal deduction limits by a vote of 43-52.

The SALT (state and local taxes) deduction cap was put forward as a revenue cost offset for the 2017 "Tax Cuts and Jobs Act." Effectively, it placed the maximum amount of state and local tax burden that people could write off on their federal taxes at $10,000. It was widely panned because it meant getting rid of a tax break that primarily affected high earners living in blue states because of the high tax burden that blue states tend to impose.

One such high-tax state is New York, whose Senator Chuck Schumer, D, came out and vowed to force the resolution vote earlier this week, saying that "America’s homeowners shouldn’t be forced to bear the brunt of the GOP’s political games.”

Wednesday's vote wasn't on any portion of the 2017 tax law itself. Rather, it was on disapproval of an IRS regulation that barred states from creating what Senate Finance Committee Chairman Chuck Grassley, R-Iowa, called "state-sponsored tax shelters where wealthy residents make payments to a state or local government-controlled fund in exchange for tax credits" used to skirt the federal deduction cap.

How much would people benefit from removing the cap? The nonpartisan Joint Committee on Taxation estimated earlier this year that while 13.1 million people would see a decrease in their tax liability from getting rid of the SALT cap, 94 percent would be those earning over $100,000 per year. Meanwhile, the majority of the $77 billion in tax decreases would go to people earning over $1 million per year.

For reference, the median U.S. income is just over $60,000 per year.

In fact, the disproportionate benefits from the move were the reason Sen. Michael Bennet, D-Colo., said he opposed the measure. He was the only Democrat to vote against repealing the rule.

“The vast majority of the benefits of repealing the SALT cap would go to high-income Americans,” Bennet said on the Senate floor ahead of the vote. “Repeal would be extremely costly, and for that same cost, we could advance much more worthy efforts to help working- and middle-class families all over the country.”

Of course, conservatives understand that in a progressive tax scheme, those paying more will benefit more when taxes go down. Democrats, however, tend to use that reality as a perennial argument against broad tax cuts.

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