Earlier this year, Susan Knudsen, the mayor of Ridgewood, New Jersey, stood before a pile of road salt to protest what she considered to be one of the biggest tax injustices in the United States.
For nearly a century, residents of towns such as Ridgewood have been able to deduct huge amounts of state and local taxes, known as “salt,” from the federal tax bill. After Donald Trump’s 2017 tax reform, the deduction cap is $10,000.
In places like Ridgewood, the local property tax averages more than $18,500 per household and helps fund the town’s highly regarded schools. The ceiling has dealt a heavy blow to some residents.
As a result, Knudsen was refreshed last week as US President Joe Biden and House Democrats pushed for a $175 million legislative plan, in addition to meeting the party’s larger goals of strengthening the national social safety net and promoting its response to climate change , It also increases the response to climate change by 2025, with a Salt cap of US$80,000.
“This will give many people a sigh of relief,” said Knudsen, who praised Josh Gottheimer, a Democrat in Congress, whose area includes Ridgewood and other high schools in northern New Jersey. Tax towns and drew a line on the salt flats.
But the feeling of relief in Ridgewood is unjust elsewhere—even for many Democrats. According to data from the Congressional Budget Office, from Maine to Montana, party members are hesitant to subsidize the wealthy, which they think will cost $275 billion, making it Biden’s iconic “rebuild better” bill The second largest component of the
This debate exacerbated the divisions within the increasingly divided parties between progressives and moderates. It also added further complications to the “Rebuild Better” bill as it went to the Senate after a difficult journey.
“If you told me a year ago that the second-largest signature bill in this Congress was to provide millionaires with a $280 billion tax giveaway, I would tell you that Republicans are in power,” Jared Gordon (Jared Gordon) Golden) said. The Democrat from Maine is the party’s only member of the House of Representatives, and he voted against “rebuilding better.”
According to the analysis of the Non-Party Tax Policy Center and the Financial Hawks Center of the Responsible Federal Budget Think Tank, 94% of the proceeds from raising the salt ceiling to $80,000 will go to the highest income quintile in the country—they are at least annually Earn $175,000-70% of which are in the top 5%.
Senator Bernie Sanders of Vermont calls for improvement Salt To limit “bad politics” and “bad policies,” he told reporters on Capitol Hill: “We must ask the rich to start paying their fair taxes, not give them more tax deductions.”
Jason Furman, a former economic adviser to then President Barack Obama, criticized earlier efforts to completely remove the cap as “obscene.”
At the same time, Republicans have been criticized for promoting tax cuts that benefit the rich. They are happy to have the opportunity to mock the bill as a concession to wealthy Democratic campaign donors in high-tax states such as New York and California.
Mitch McConnell, the top Republican in the Senate, called it “the wealth of the Blue State millionaire and billionaire.”
“They are basically just pointing out the hypocrisy of the Democrats,” said Doug Heye, a Republican strategist.
The Biden administration’s response seemed a little shy.White House Press Secretary Jen Psaki told reporters that the president’s excitement about the package Salt reduction; This is about other key components”.
But Howard Gleckman of the Nonpartisan Tax Policy Center pointed out that pacifying voters in high-tax suburbs may be crucial to the Democratic Party’s chances of winning in next year’s midterm elections.
“[House members from high-income areas] If they cannot provide some kind of relief, they are likely to lose the election,” he said. “If they lose their seats, it will increase the chance that the Democrats will lose control of the House of Representatives. “
The ultimate fate of this clause is uncertain, because it requires the support of all 50 Democrats in the Senate. One possible solution being studied by Sanders and New Jersey Senator Robert Menendez is to limit income-based deductions, and there may be a deadline for people with annual incomes of more than $500,000.
Michael Hayes, a professor of public policy at Rutgers University, said: “The message is that the salt tax will reduce taxes for the rich-this is not necessarily wrong.”
Nonetheless, Hayes believes that the salt cap is more complicated than this, partly because of its broader economic impact on housing prices and the construction industry.
Although Salt may seem embarrassing to some Democrats, it actually exists in places like New Jersey. The state has the highest property tax in the United States, with an average of $9,112 in 2020. In contrast, the average property tax in states such as Louisiana and Alabama is less than $1,000.
The anger at Salt Cap helped New Jersey Democrats such as Mikie Sherrill and Tom Malinowski to enter Congress in the Republican district in mid-2018.At the same time, this month Governor election When a little-known Republican candidate almost upsets the incumbent Phil Murphy by criticizing the issue to some extent, it is a disturbing reminder of voters’ frustration with high taxes.
The inherent fear caused by the salt cap is that heavier tax burdens will not only squeeze residents, but also weaken the area’s high housing prices. So far, this has not happened. One reason may be that the pandemic has prompted many urban residents to flock to the suburbs.
“To be honest, I just didn’t have a buyer to bring it up,” said Claudia Inoa, an agent for Ridgewood Keller Williams.
According to Knudsen, in historical pandemics and economic crises, it is difficult to assess the impact of the salt cap. Earlier this week, when people moved to Ridgewood (Ridgewood), they understood the town’s proposal, where the quaint village center was preparing to welcome Christmas. The mayor said: exchange high property taxes for top Public school.
One of the reasons the tax is so high is its property value. According to data from Realtor.com, as of October, the median asking price of a house was $872,000, an increase of 11.5% from a year ago.
Nevertheless, Knudsen believes that the conclusion that removing the ceiling will only benefit the rich is wrong. “Not everyone here is rich,” she said. “This affects many middle-income people.”