Most millionaires would get a tax cut under House Democrats’ reconciliation plan, according to a new analysis that's sure to get lawmakers’ attention.
About two-thirds of people making more than $1 million would see a tax cut next year averaging $16,800, the Tax Policy Center said Thursday.
That’s primarily because Democrats are proposing to lift to $80,000, from $10,000, an annual cap on state and local tax deductions.
The report is certain to inflame an already difficult fight among Democrats over what to do about the limitation, imposed by Republicans as part of their 2017 tax cuts.
Party leaders are caught between demands from colleagues representing high-tax states like New Jersey, who are threatening to sink their reconciliation plan if SALT isn’t addressed, and others complaining that will only muddle the party’s mantra of soaking the rich.
Senate Democrats are also proposing to ease the cap, though only for those earning less than $400,000, roughly.
“The politics is very challenging for Democrats,” said Howard Gleckman, a senior fellow with the group. “The distributional tables look terrible” for them.
Overall, Democrats’ plan would increase taxes on the well to do while reducing them for average Americans.
Even though most millionaires would receive a tax cut, people with seven-figure incomes — on average — would see their tax bills climb by $68,000, TPC estimates. That’s because one-third of millionaires would face tax increases averaging $228,000.
Aside from easing the SALT cap, Democrats are also proposing new surcharges on the very rich, with those earning more than $10 million facing a new 5 percent surtax. People making more than $25 million would pay another 3 percent on top of that.
So people above those income thresholds would pay more under Democrats' plan, even as they benefit from a higher SALT cap, while those making more than $1 million but not enough to face those surcharges would owe less.
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