The second-biggest program in the Democrats’ spending plan gives billions to the rich

Raising the state and local tax deduction cap would primarily benefit the top 10 percent of income earners

On Friday the House passed President Biden’s Build Back Better legislation. The roughly $2 trillion social spending bill includes investments in clean energy and affordable child care — but it also includes a $275 billion tax cut that would almost exclusively benefit high-income households over the next five years.

The measure is expected to change in the Senate, where Sens. Bernie Sanders (I-Vt.) and Bob Menendez (D-N.J.) are crafting a less regressive form of SALT cap relief.

In the House bill, the measure would allow households to increase their deduction from state and local taxes from $10,000 to $80,000 through 2025. The measure is paid for by imposing a new deduction cap from 2026 until 2031.

It’s the second-most expensive item in the legislation over the next five years, more costly than establishing a paid family and medical leave program, and nearly twice as expensive as funding home-medical services for the elderly and disabled, according to an analysis by the Committee for a Responsible Federal Budget.

“Anything you do to eliminate the SALT cap is going to be regressive, because that tax is overwhelmingly paid by very high-income people,” said Howard Gleckman at the Tax Policy Center. “Anything you do to lower that tax doesn’t matter for most people.”

The rich are poised to gain more from the SALT cap increase than lower-income people are from other elements of the bill, such as the child tax credit. According to the CRFB, a household in D.C. making $1 million a year would benefit 10 times as much from the SALT cap as a middle-class household would from extending the increased child tax credit for one year, which would provide an extra $1,600 for children under 6 and an extra $1,000 for older children.

“We’re debating about whether to give lower- and middle-class families a thousand dollars more a year through the child tax credit, while giving upper-class families $10,000 or more through SALT,” said Marc Goldwein, senior policy director at the CRFB. “That’s counter to everything the Democrats have been saying Build Back Better is about and everything they said about the Trump tax cuts.”

Raising the SALT cap would more than offset other tax increases for the wealthy in 2022, according to a report from the Tax Foundation.

Who would pay more and less in taxes under the House bill

Proponents of the SALT cap provision in the Build Back Better Act argue that, over 10 years, the SALT provision would actually raise revenue. That’s because the new, higher cap would last for nine years and then drop to $10,000 in 2031, while the current $10,000 cap is set to expire in 2025. The maneuver pays for four years of tax cuts by adding six years of higher taxes later.

The SALT provision wasn’t in Biden’s original social spending and infrastructure plans or in early versions of legislation in the House. Some form of SALT relief had been under discussion since the House first took up the reconciliation bill, said Garrett Watson, a senior policy analyst at the Tax Foundation. But the measure wasn’t added until November, after negotiations that lowered the cost of the bill to woo centrist votes.

“This is a touchy issue and controversial issue even among folks on the center left,” Watson said. “It was inserted late in the game, perhaps because of these competing desires to make the tax code more progressive, but also to provide tax relief to certain higher-income constituencies who, right or wrong, feel like they’ve been treated unfairly.”

The provision was added at the urging of representatives from high-tax, high-income states like New Jersey and New York, which were hit particularly hard by the SALT cap.

Rep. Thomas Suozzi (D-N.Y.), one of the measure’s proponents, said the $10,000 SALT cap imposed in 2017 represented a sudden change in the tax code and imposed an undue burden on his constituents, pushing some high-income residents to leave the state.

“We’ve made decisions for 100 years based on the tax code,” Suozzi said. “In 2017, the rug was pulled out from underneath us, and now it’s less attractive to live in our states.” He argued that in New York, a family earning $150,000 or $200,000 a year might still be considered middle class due to the state’s higher cost of living, and would benefit from a higher SALT cap.

However, the Tax Policy Center reports that about 70 percent of the benefit of the bill would go to the top 5 percent of earners in the United States, those making $366,000 a year or more. That’s because, according to Watson, many middle-income earners no longer use the SALT deduction at all. Other changes in the 2017 tax bill made itemized deductions less attractive to all but high-income Americans, pushing most other taxpayers to use a standard deduction that does not take state and local taxes into account.

With infrastructure victory in hand, Democrats brace for next battle over $2 trillion spending bill

The House bill is unlikely to pass the Senate in its current form. However, some form of SALT cap relief is likely to be in the final bill, though it may be with a lower deduction limit or an income cap.

Senior Democratic leaders are also exploring tempering the impact of the increased SALT cap by raising the alternative minimum tax, which ensures that high-income households aren’t able to avoid income taxes altogether through deductions like SALT.


A previous version of this story stated that the top one percent on income earners received on average far more in savings than all other taxpayers combined. While the average savings is higher, the total savings among the one percent is not greater than that received by all other taxpayers.