Biden stimulus bill: tax relief for wealthy, subsidies for high-tax states, critics say

The Tax Policy Center estimated more than 82% of the benefits from lifting the $10,000 cap on SALT deductions would flow to households in the top 5% of income distribution nationally.

Published: February 18, 2021 8:33pm

Updated: February 20, 2021 2:20pm

The $1.9 trillion COVID-19 stimulus package supported by President Biden includes a measure that would disproportionately benefit the richest Americans — those in the top 5% of income — by giving them tax breaks, while also rewarding state governments that overtax and overspend, economic experts told Just the News.

By eliminating the cap on the State and Local Tax (SALT) deduction, Biden's plan would benefit rich Americans in places like New York (home to Senate Majority Leader Chuck Schumer) and California (home to House Speaker Nancy Pelosi). 

Among other things, the Biden bill would repeal the part of the 2017 Tax Cuts and Jobs Act that caps the SALT deduction at $10,000. Tax experts at the Tax Policy Center estimated in 2018 that repealing the $10,000 SALT limit would primarily benefit families in the top 5% of income earners around the country.

The Center reported that more than 82% of the benefits of the policy would flow to households in the 95th to 100th percentile of cash income, with households in the top 1% receiving an average tax break of $31,380 and households in the top 0.1% pocketing an average $142,590 in tax relief.

Brandon Arnold, executive vice president at the National Taxpayers Union, told "Just the News AM" television program, "It's the wealthy Silicon Valley millionaires and billionaires that are going to stand to benefit from this, at the cost, of course, of huge deficits, of huge debt."

Arnold said removing the SALT deduction cap would effectively be a subsidy for poorly-run states that overtax their citizens, who then turn around and deduct those taxes from their federal tax burden, effectively serving as a subsidy for high-tax states.  

"This is a complete role reversal," Arnold said. "It's Democrats saying, 'Let's give tax cuts to our wealthy supporters' and pretending like it's good for the economy." 

The Tax Cuts and Jobs Act "put that cap into place in order to improve tax policy and to make sure that the lawmakers in Sacramento and Albany, in Illinois and other high-tax states weren't just running amok and taxing the heck out of their citizens," Arnold said.

Noting that most of the roughly $1 trillion approved by the previous Congress primarily to help small businesses under the Paycheck Protection Program has not been allocated, Arnold said any new COVID relief package should be narrowly targeted to fight the pandemic specifically.

"We're in a pandemic, we're in a difficult economic period, we ought to be focusing on things that are going to get us back to the economic success we had in 2019," Arnold said.

"The biggest beneficiaries will be high-income individuals in high-tax states, such as California, New York, New Jersey, Connecticut, and Hawaii," said Diana Furchtgott-Roth, adjunct professor of economics at George Washington University and former deputy assistant secretary for research and technology at the Department of Transportation.

"Democrats are classifying a $600 billion (over the decade) tax cut for the rich as a national COVID emergency," Brian Riedl, senior fellow in budget, tax, and economics at Manhattan Institute for Policy Research, told Just the News in an email. "Even Republicans would not dare propose a tax cut so tilted to the wealthy. For all their rhetoric about helping the poor, House Democrats are truly prioritizing their upper-class voter base."

The White House press office did not respond to a request for comment for this article. While in the White House, former President Trump strongly opposed COVID subsidies for state and local governments, saying that he opposed subsidizing poorly-run states that had bad fiscal management prior to the pandemic.  

Brent Gardner, chief government affairs officer at Americans For Prosperity, told Just the News that his organization "strongly" opposes any efforts to roll back the SALT deduction cap.

"The SALT deduction has allowed fiscally irresponsible states to spend recklessly and then pass the burden to federal taxpayers elsewhere — disproportionately benefiting the wealthiest people in the wealthiest states at the expense of middle-class taxpayers hundreds or thousands of miles away," Gardner said via email. "This is exactly the kind of thing COVID relief legislation shouldn't be doing — pushing harmful, unrelated, political wish-list items." 

Instead, Gardner said, Congress needs to focus on providing "timely, targeted, temporary relief for those hardest hit by the pandemic and on solutions that actually help curb the spread of the virus — not bailing out decades of unrelated bad state policy."

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