Democrats' SALT Proposals Would Give Tax Windfall To Rich Americans On Both Coasts
Wealthy professionals on both coasts of the United States would receive a massive tax windfall if Congressional Democrats are successful slipping in one of two competing plans to change the State and Local Tax (SALT) deduction - which was capped at $10,000 as part of the Trump tax plan.
According to a Bloomberg-sponsored analysis by accounting firm Marcum, those with six-figure salaries and high property / state income tax bills will benefit the most.
If Democrats get their way in the new reconciliation bill, the rich - and the superrich - would be able to deduct up to $80,000 of SALT.
Dems, of course, are pitching it as a benefit to the middle-class.
"This fix will put money back in the pockets of hardworking, middle-class families in our districts and help ensure that our local communities can continue making the investments that we need," said Reps. Tom Suozzi (D-NY) and Mikie Sherrill and Josh Gottheimer (D-NJ) said in a statement.
In an attempt to temper outrage over a tax cut for the uber-wealthy, Rep. Bernie Sanders (I-VT) and Bob Menendez (D-NJ) have suggested limiting the SALT cap removal to households under a certain threshold which has ranged from a proposed $400,000 to $500,000. Sanders said his plan is a "proposal that protects the middle class, but does not end up with an overall reconciliation bill in which millionaires are better off tax-wise than they were under Trump," adding that rich taxpayers would still be able to deduct $10,000 in SALT as they can under current law.
The practical impact of each proposal would vary widely based on where a taxpayer lives, what they pay in property taxes and how many other deductions they claim, including for mortgage interest and charitable donations. -Bloomberg
Scenarios:
According to Marcum, a married suburban couple in New York earning $150,000, who have a $400,000 mortgage, pay $10,000 in property taxes, and have $2,500 in charitable donations per year would save them $1,743, lowering their overall tax rate by 1%.
For a couple earning $400,000 - owing $25,000 in property tax, deduct interest on a $750,000 mortgage, and give $6,000 to charity each year, they would be able to deduct over $50,000 in SALT expenses on their federal returns - saving nearly $12,000 for a 3% drop in their effective tax rate.
https://www.zerohedge.com/political/democrats-salt-proposal-would-give-tax-windfall-rich-americans-both-coasts