Republicans in the House are set to give another blue state bailout to benefit the richest residents of California and New York. We are talking about the scheme in the latest tax bill to DOUBLE the state and local tax (SALT) deduction on federal tax returns. Even the New York Times admits that the SALT deduction “primarily benefits the rich” in the highest tax states.
As the chart below shows, when the full SALT deduction was in effect, more than half of the benefits went to six blue states and almost one-third went to wealthy tax filers in California and New York – the nation’s highest tax states.
The SALT deduction is a terrible federal policy that only rewards states to raise their income tax rates because in-state residents get to deduct roughly one-third of the tax hike from their federal tax return. It punishes low-tax states.
Virtually no tax filers with incomes less than $75,000 would benefit from resurrecting this tax loophole – because few Americans with incomes below that level itemize their deductions. The biggest winners from this giveaway are those in the top 1% who live in Manhattan and Silicon Valley.
By the way, we thought Bernie Sanders and the Dems wanted to tax the rich, but apparently not the rich in their own states.