Democrats in Blue Jersey were the first to gripe when President Trump shaped his 2017 tax cut to deliver most of the cash to the wealthiest among us, while leaving crumbs for the middle-class.
So, it is quite a spectacle to see them now, doing the same thing. If it was a sop to the rich when Trump did it, isn’t it the same when Democrats do it?
The tax cut in question is the federal deduction for state and local taxes, known as the SALT deduction. The 2017 law capped that deduction at $10,000, which is just above the average New Jersey homeowner pays in property taxes alone. So, this change hit hard in blue states like New Jersey, New York and California, where state and local taxes are highest.
But their solution is as bad as the problem. Instead of devising a remedy aimed at protecting the middle-class, our delegation is insisting on changes that skew the benefits to the very rich by lifting the cap to $80,000. Middle-class families don’t pay anywhere near that amount in state and local taxes. By lifting the cap that high, Democrats are ensuring that most of the dollars go to the rich.
Here are the numbers, according to the Committee for a Responsible Federal Budget: Two-thirds of households earning more than $1 million a year would get a tax cut, while just one-third of those earning less than $100,000 would. In all, 80 percent of the money would go to those making over $200,000.
Sen. Bernie Sanders is choking on the hypocrisy of Democrats. “It sends a terrible, terrible message,” he says. “You can’t be on the side of the wealthy and the powerful if you’re going to really fight for working families.”
Sanders is negotiating with Sen. Bob Menendez on an improved version that would cap the income of those who can claim the deduction. Sanders is willing to set the income limit at $400,000, while Menendez is pressing for $550,000 for individuals and twice that for couples. Here’s hoping that Sanders prevails.
Menendez and Sanders will probably reach agreement, a key hurdle for the Build Back Better bill. The Senate version would then go back to the House for a vote, and that’s where House Democrats in swing districts will face a moment of truth.
Rep. Josh Gottheimer has threatened to vote against the bill if he’s unsatisfied with the SALT provisions, putting at risk the core of President Biden’s agenda, including the muscular efforts to fight climate change and reduce child poverty. One hopes that he is bluffing. To steer this ship into the rocks over SALT would be an obscene overreaction.
Rep. Mikie Sherrill and Rep. Tom Malinowski argue that the $10,000 cap passed in the 2017 bill effectively punishes states like New Jersey that spend generously on education, health care, and other progressive causes that benefits families of modest means. In red states that are stingier, the cap would not have the same bite.
“It benefits a state like Florida, and punishes a state like New Jersey,” Sherrill says.
“They wanted to bludgeon states like New Jersey into becoming more like Kansas,” says Malinowski.
That’s undeniable true and is especially obnoxious when you consider that blue states tend to send more money to Washington than they get back. In 2019, according to the Rockefeller Institute, New Jersey lost $10 billion in that exchange, a huge number. In that same year, Florida gained $51 billion.
But the answer isn’t to shower benefits on the rich. That doesn’t even the score for middle-class families, it only widens the economy inequality within our borders.
For Democrats representing suburban swing districts, including Sherrill, Gottheimer, Malinowski and Rep. Andy Kim, it is a political imperative to deliver some relief from the SALT cap. But it is not imperative that it be designed to shower its benefits so unequally.
More: Tom Moran columns
Tom Moran may be reached at tmoran@starledger.com or call (973) 836-4909. Follow him on Twitter @tomamoran. Find NJ.com Opinion on Facebook.
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