Please ensure Javascript is enabled for purposes of website accessibility
Will High-Income Californians Get a Big Tax Break?
dan_walters
By Dan Walters, CalMatters Commentary
Published 3 years ago on
November 23, 2021

Share

The House has passed President Joe Biden’s $1.85 trillion social policy package but it faces a tough slog in the evenly divided Senate.

The White House and Senate Democratic leader Chuck Schumer are being squeezed between demands from two centrist Democratic senators that the package be trimmed and warnings by those on the left, including Sen. Bernie Sanders, they might turn against the legislation if it is diluted too much.

Dan Walters

Opinion

One of the specific points of contention is something that would have multi-billion-dollar impacts on California — a partial repeal of the $10,000 cap on income tax deductions for state and local taxes, dubbed SALT.The cap, part of a Republican tax overhaul signed by former President Donald Trump in 2017, hit high-tax states such as New York and California hard. It indirectly raised federal taxes on their high-income residents and, state officials worried aloud, encouraged them to either migrate to other states with lower taxes or otherwise reduce their tax exposures.

State Says Limitation Costs Californians $12 Billion a Year

California’s Franchise Tax Board, its income tax collection agency, estimated in 2018 that the SALT deduction limit cost Californians an additional $12 billion a year in federal taxes.

Three-fourths or $9 billion of the estimate fell on Californians with incomes of $1 million or more, the tax board calculated, with the other $3 billion coming from those with taxable incomes of $100,000 to $999,999. Given the sharp growth in personal income since then, the bite is probably more like $20 billion today.

Schumer, who is from New York, and House Speaker Nancy Pelosi, who is from California, have been trying ever since the cap was imposed to either repeal or modify it, and the governors of affected states, including California’s Gavin Newsom, have been pushing hard for a change.

The version of Biden’s package that emerged from the House would raise the cap to $80,000 through 2030, then reduce it back to $10,000 in 2031 before allowing it to expire in 2032, seven years after the current 2025 expiration date. The manipulation of SALT deductions is aimed at making it pencil out, on paper, as a net gain in federal revenue over the long term.

Some See Modification as Giveaway to Rich

However, Sanders and others on the left see it as a giveaway to the rich that would violate the Democratic Party’s mantra that the wealthy should shoulder a greater tax burden.

Rep. Jared Golden, a Maine Democrat, tweeted last week that the partial repeal of the cap sounds more like something Republicans would propose, rather than top Democrats.

“Proponents have been saying that the (Biden package) taxes the rich,” Golden said on Twitter. “But the more we learn about the SALT provisions, the more it looks like another giant tax break for millionaires.”

Oddly, Republicans see the SALT modification through the same political lens, alleging that it would benefit coastal elites in California, New York and other blue states but hurt Democrats in swing states next year.

Revision Likely to Remain in Package

“I think they’re struggling to maintain their professed support for taxing the wealthy, yet they are providing a huge tax windfall under the SALT cap,” Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, told the New York Times. “If your priorities are working families, make that the priority, not the wealthy.”

With heavyweight support from leading Democrats and the White House, the SALT cap modification is very likely to remain in the package — if, indeed, it garners enough votes to win final approval. We’ll know in a year whether it helps Republicans regain control of Congress.

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of them working for California newspapers. He now writes for CalMatters, a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters.  For more columns by Dan Walters, go to calmatters.org/commentary.

RELATED TOPICS:

DON'T MISS

President-Elect Trump Has Sweeping Plans. Here’s What He’s Proposed.

DON'T MISS

New Look Basketball Bulldogs Open at Home. How Will They Fare Under Walberg?

DON'T MISS

Americans Seek Fresh Start Abroad as Election Sparks Expat Interest

DON'T MISS

President-Elect Trump Names Susie Wiles as Chief of Staff

DON'T MISS

Robert F. Kennedy Jr., Foe of Drugmakers and Regulators, Is Poised to Wield New Power

DON'T MISS

California Beat Trump in Court His First Term. It’s Preparing New Cases for His Second.

DON'T MISS

With Mountain West Title Out of Reach, What Is Fresno State Playing For?

DON'T MISS

Former Fresno State Bull Rider, a Vietnam Vet, Calls Central Valley Honor Flight ‘Life-Changing’

DON'T MISS

Don’t Expect Kamala Harris’ Loss to Boost Gavin Newsom’s Presidential Prospects

DON'T MISS

Questions About Sexual Orientation and Gender ID on Track to Be on US Census Bureau Survey by 2027

UP NEXT

How Harris Lost Will Be Her Legacy

UP NEXT

Trump, Musk and an American Masculinity Crisis

UP NEXT

Let’s Keep Innovative Partnerships Crucial to Combating Climate Change: Fresno Dairy Manager

UP NEXT

No Matter the Outcome, We Are the True Losers of This Election

UP NEXT

California’s Transition Off Carbon Fuels Could Be a Monumental Disaster

UP NEXT

Don’t Let Liberal Purity Elect Trump

UP NEXT

Newsom Provides Welfare to the Wealthy, Skimps on Anti-Homelessness Programs

UP NEXT

Independent Gen Zers Will Decide Elections From Now On

UP NEXT

America’s Political Divide Shifts from Economics to Education: Fareed Zakaria

UP NEXT

Fresno Unified Reform Is a Must. Force It With a ‘No’ on Measure H.

President-Elect Trump Names Susie Wiles as Chief of Staff

2 hours ago

Robert F. Kennedy Jr., Foe of Drugmakers and Regulators, Is Poised to Wield New Power

2 hours ago

California Beat Trump in Court His First Term. It’s Preparing New Cases for His Second.

2 hours ago

With Mountain West Title Out of Reach, What Is Fresno State Playing For?

3 hours ago

Former Fresno State Bull Rider, a Vietnam Vet, Calls Central Valley Honor Flight ‘Life-Changing’

4 hours ago

Don’t Expect Kamala Harris’ Loss to Boost Gavin Newsom’s Presidential Prospects

4 hours ago

Questions About Sexual Orientation and Gender ID on Track to Be on US Census Bureau Survey by 2027

4 hours ago

Large Airstrikes Hit Beirut Suburbs as Israel Expands Northern Gaza Operations

4 hours ago

California Governor Calls Special Session to Protect Liberal Policies From Trump Presidency

4 hours ago

Putin Congratulates Trump on His Election Victory in His First Public Comments on the US Vote

5 hours ago

President-Elect Trump Has Sweeping Plans. Here’s What He’s Proposed.

WASHINGTON — Donald Trump has promised sweeping action in a second administration. The former president and now president-elect often skippe...

8 mins ago

8 mins ago

President-Elect Trump Has Sweeping Plans. Here’s What He’s Proposed.

21 mins ago

New Look Basketball Bulldogs Open at Home. How Will They Fare Under Walberg?

44 mins ago

Americans Seek Fresh Start Abroad as Election Sparks Expat Interest

Trump co-campaign manager Susie Wiles is seen at Nashville International Airport as Republican presidential candidate former President Donald Trump arrives, July 27, 2024, in Nashville, Tenn. (AP File)
2 hours ago

President-Elect Trump Names Susie Wiles as Chief of Staff

Robert F. Kennedy Jr. speaks during a campaign rally for former President Donald Trump, the Republican presidential nominee, at Madison Square Garden in New York, Oct. 27, 2024. President-elect Donald Trump has encouraged Kennedy to “go wild on health,” but has not made clear what role he will play. (Hiroko Masuike/The New York Times)
2 hours ago

Robert F. Kennedy Jr., Foe of Drugmakers and Regulators, Is Poised to Wield New Power

2 hours ago

California Beat Trump in Court His First Term. It’s Preparing New Cases for His Second.

3 hours ago

With Mountain West Title Out of Reach, What Is Fresno State Playing For?

4 hours ago

Former Fresno State Bull Rider, a Vietnam Vet, Calls Central Valley Honor Flight ‘Life-Changing’

Search

Send this to a friend