NY, NJ Dems Demand Tax Cut For Wealthy Constituents

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Posted by Alex Hendrie on Thursday, April 1st, 2021, 12:45 PM PERMALINK

The top priority of several New York and New Jersey Congressmen is a tax cut for wealthy blue state residents that will do little or nothing to help the middle class. 

The 2017 Tax Cuts and Jobs Act limited the deduction for state and local taxes to $10,000 in conjunction with lowering rates. This resulted in a net tax cut for the vast majority of American individuals and families across the country.

Now, House Democrats including Reps. Tom Suozzi (D-NY), Mikie Sherrill (D-NJ), Josh Gottheimer (D-NJ), and Rep. Bill Pascrell (D-NJ) are pushing to uncap the SALT deduction in President Biden’s next legislative package.

Rep. Suozzi even said he would not support any tax change in the upcoming package if this provision was not included. Suozzi has also previously said he would publish a “blacklist” of any New Yorker that donated to a candidate that opposed uncapping SALT.

Democrats routinely call for increasing taxes on “the rich” so that they pay their “fair share.” However, some Democrats are now calling for restoring SALT despite the fact that they have been vocal supporters for taxing “the rich.” For instance, in a March 25, 2021 press release, Rep. Jamaal Bowman (D-NY) called for restoring the SALT deduction arguing its absence “caused financial distress for so many of my constituents.”

However, this contradicts his many past statements where he called for higher taxes on the rich. In fact, just a few days ago he tweeted that we need to “end tax breaks for the wealthy.”

Evidently, he meant as long as they aren’t his constituents.

Repealing the SALT deduction is extremely regressive and would overwhelmingly benefit upper income earners. This has been noted by analyses conducted by nonpartisan and left-of-center organizations. For instance:

  • The left-of-center Tax Policy Center found that the top 1 percent of households would receive 56 percent of the benefit of repealing the SALT cap, and the top 5 percent of households would receive over 80 percent of the benefit. The bottom 80 percent of households would receive just 4 percent.
  • The Joint Committee on Taxation found that restoring an unlimited SALT Cap would give taxpayers earning over $500,000 per year a collective tax cut of almost $55 billion per year, while taxpayers earning less than $75,000 per year will collectively see a tax cut of about $100 million.
  • Senator Michael Bennet (D-CO) criticized efforts to repeal the SALT cap in 2019, arguing that it conflicted with Democrat ideals. He stated, “We can say we’re for a progressive tax bill and for fighting inequality, or we can support the SALT deduction, but it’s really hard to do both of those things.”
  • The left-leaning Center for Budget and Policy Priorities has stated that this proposal would be “regressive and costly.”
  • The Center for American Progress has stated that repeal of the SALT cap “should not be a top priority” as it would “overwhelmingly benefit the wealthy, not the middle class.”

 

Democrats falsely claim that when the unlimited SALT Cap was repealed, Americans in blue states like New Jersey and New York saw a massive tax hike and were hit with double taxation, as they now pay federal taxes on income that was already subject to state and local taxes.

First, a majority of Americans do not claim the SALT deduction, or any deduction. Instead, they claim the standard deduction. In 2018, 133 million American taxpayers (or 87% of filers) claimed the standard deduction. These taxpayers deduct zero state and local taxes, so they have no protection against double taxation.

The majority of Americans in blue states like New Jersey and New York saw a tax cut, not a tax increase from the TCJA.

According to IRS Statistics of Income Data, the average taxpayer in both New York State and New Jersey earning between $50,000 and $200,000 saw a tax cut between 2017 and 2018.

Taxpayers in both states with AGI of between $75,000 and $99,999 saw an average federal income tax cut of 10 percent, while taxpayers between $100,000 and $199,999 in AGI saw an average tax cut of between 6 and 7 percent. While this does not mean that every taxpayer in this income bracket saw a tax cut, it does mean the majority of taxpayers in blue states did not see a tax hike, as Democrats claim.

Blue state Democrats should explain why they are okay with cutting taxes for “the rich” when it is their constituents, but not when it’s voters across the country.

Change in Tax Liability of Average Taxpayer in New York State Between 2017 and 2018


Change in Tax Liability of Average Taxpayer in New Jersey Between 2017 and 2018

 

Photo Credit: New Jersey National Guard

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