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The big idea

Democrats' fight over taxing the rich gets SALT-y

Democrats began work on President Biden’s massive Build Back Better legislation intending to fund it with sharp tax hikes on the rich and corporations. But months later, the party finds itself locked in an improbable debate about whether, and how much, to cut taxes on some wealthy Americans.

At the center of the argument is some Democrats’ push to repeal the $10,000 cap on how much state and local taxes (SALT) Americans can deduct from their federal taxes, a limit imposed in former president Donald Trump’s 2017 tax law that punished mostly high-tax Blue states.

It’s a complex political fight pitting House against Senate, lawmakers across the political spectrum, with Biden’s personal position unclear for now — an Office of Management and Budget statement last night on the House Democrats’ BBB bill did not mention SALT.

Strange bedfellows

Opposition to doing away with the cap has united an unlikely set of allies — in almost any other circumstances, seeing former treasury secretary Larry Summers, former top Obama economic adviser Jason Furman, and Sens. Bernie Sanders (I-Vt.) and Robert Menendez (D-N.J.) in the same room would suggest the pilot episode of an unusual “Survivor” reboot.

That’s no longer the case.

On Tuesday, after Democrats suggested their $1.75 package to expand child care, battle climate change and social spending would also end the SALT cap. Furman tweeted it was “obscene” the bill would “do more for the super-rich than it does for climate change, childcare or preschool.”

“I am certainly no left wing ideologue,” Summers said on Twitter, “but I think something [is] wrong when taxpayers like me, well into the top .1 percent of income distribution, are getting a significant tax cut in a Democrats only tax bill as now looks likely to happen."

The latest bill from House Democrats caps SALT deductions at $72,500 through 2031, up from the Trump law that set the $10,000 through 2035 (the relevant text is on pages 1729 and 1730). That doesn’t, however, mean Senate Democrats will agree to it.

“Much less bad than full repeal which was worth hundreds of thousands. But still more than low- or middle-income getting from BBB,” Furman said on Twitter Wednesday.

Sanders and Menendez, meanwhile, have floated lifting the cap only for people earning less than $400,000, according to Steven T. Dennis of Bloomberg News.

Other ideas

My colleagues Jeff Stein and Tony Romm reported Wednesday morning that senior Democrats were considering expanding a new minimum tax on upper-income households to offset the effects of easing the SALT cap.

Jeff and Tony reported “senior Democratic leaders have eyed pairing the repeal of the SALT cap with an expanded 'alternative minimum tax,’ which was effectively gutted by the 2017 GOP tax law, the people familiar with the negotiations said. That would at least partially mitigate the amount that the rich would benefit from the repeal of the SALT cap. The AMT was supposed to prevent people from piling up so many tax deductions that they virtually eliminate all of their tax liability.”

The politics of SALT are complex. The White House doesn’t relish the prospect of a tax cut for rich Americans. Neither do progressives in either chamber.

The right-leaning Tax Foundation think tank estimates 80 percent of the benefits from the House Democratic draft would go to people earning more than $200,000, with the “biggest winners” those making between $250,000 and one million dollars.

(That reflects the impact of the Trump cap. A nonpartisan Tax Policy Center analysis from 2018 says 96 percent of the additional tax falls on the richest 20 percent of taxpayers and 57 percent on the top 1 percent.)

House legislation to lift the cap, drafted by Blue-state moderates, has 106 co-sponsors. Some centrists have promised to vote against the legislation if the SALT cap isn’t at least eased.

Biden himself has always been mindful of the politics of raising taxes on the uppermost earners. Much of his first speech to Congress back in April focused on beating back accusations of “class warfare.” 

I’m not looking to punish anybody,” Biden said in his first speech to Congress, back in April. “I think you should be able to become a billionaire and a millionaire — but pay your fair share.”

Back in April, White House press secretary Jen Psaki dryly noted “eliminating SALT obviously is not a revenue raiser.”

Then she twisted the knife, suggesting the lawmakers who want to do away with the caps have misplaced priorities.

“Our focus right now is on ensuring that we are getting relief to the broad swath of the American people who are most impacted by the downturn: the 10 million Americans out of work, people who are looking to be a part of growing industries of the future,” she said. “But we understand that many Democrats — or some Democrats, I should say — are focused on that [SALT] and interested in discussing it. We're happy to discuss it with them.”

What’s happening now

Igor Danchenko, source for Steele dossier, arrested as part of Durham probe

“An analyst who was a primary source for a 2016 dossier of allegations against Donald Trump has been arrested on charges stemming out of special counsel John Durham’s probe of that matter,” Devlin Barrett reports.

  • “Danchenko’s role in providing information to British ex-spy Christopher Steele, who compiled the accusations about Trump in a series of reports, has long been a subject of investigators’ scrutiny.”

White House vaccine rule to require workers and companies to comply by Jan. 4

The hotly anticipated rule will be released Friday, senior government officials said. “It would require weekly testing and mandatory face-masking for workers who choose not to get vaccinated. It also specifies that employers must provide paid time for workers to get vaccinated or recover from any side effects — something critics have been asking for months. But companies are able to require employees to foot the bill for tests, officials said,” Eli Rosenberg reports.

New Build Back Better text just dropped

Paid leave and SALT changes made the cut. 

Britain authorizes world’s first approval of oral covid-19 treatment pill

“Experts have said that if widely authorized, the medicine could have huge potential to help fight the coronavirus pandemic: Pills are easier to take, manufacture and store, making them particularly useful in lower- to middle-income countries with weaker infrastructure and limited vaccine supplies,” Ellen Francis and Claire Parker report.

Two federal judges poised to begin unlocking reams of Jan. 6 secrets

“The information, from Donald Trump’s White House files and from the rioters themselves, could dramatically reshape the public’s understanding of the insurrection,” Politico’s Kyle Cheney and Josh Gerstein report.

Efforts to calm Ethiopia as war reaches one-year mark

“Urgent new efforts to calm Ethiopia’s escalating war unfolded Thursday as a U.S. special envoy arrived and the president of neighboring Kenya called for an immediate cease-fire while the country marks a year of conflict,” the Associated Press’s Cara Anna reports.

“The lack of dialogue ‘has been particularly disturbing,’ Kenyan President Uhuru Kenyatta said in a statement, as the war that has killed thousands of people and displaced millions since November 2020 threatens to engulf the capital, Addis Ababa.”

Lunchtime reads from The Post

Yet another haunting milestone: 750,000 dead

“In the first year and a half of the pandemic, a common way to try to fathom the loss was to compare the nation’s death toll to the living population of increasingly larger cities: Kenosha, Wis., at 100,000 deaths, Salt Lake City at 200,000, St. Louis at 300,000, Atlanta at 500,000,” Marc Fisher, Lori Rozsa and Kayla Ruble report.

Now, according to Johns Hopkins University’s running tally of covid deaths, the losses have reached a level that can be compared to entire states: If the Americans who’ve died of covid made up a state, it would rank 47th in the country, more populous than Alaska, Vermont or Wyoming. The District of Columbia — though not a state, it surpasses Vermont and Wyoming in population — also would be eclipsed.”

A night of firsts

Asian American candidates won at least two big city mayoral offices in what is being hailed as a major victory for a group that has the least representation in politics despite being one of the fastest-growing demographics. Their electoral triumphs also come at a time when Asian Americans have experienced an uptick in hate crimes during the coronavirus pandemic,” Christine Armario reports.

“They weren’t the only ethnic and racial minorities to witness history Tuesday night: Pittsburgh and St. Petersburg, Fla., elected their first Black mayors, while voters in Durham, N.C., voted in their first Black woman leader. Many of the candidates won in areas where the groups they represent are not a large percentage of the population. And while they may have spoken about their backgrounds, they did not necessarily make it a focal point of their campaigns.”

… and beyond

The common threads that lead to radicalization

“The Associated Press set out to examine the paths and mechanics of radicalization through case studies on two continents: a 20-year-old man rescued from a Taliban training camp on Afghanistan’s border, and an Iowa man whose brother watched him fall sway to nonsensical conspiracy theories and ultimately play a visible role in the mob of Donald Trump loyalists that stormed the Capitol,” Heather Hollingsworth, Kathy Gannon and Eric Tucker report.

“Two places, two men, two very different stories as seen by two close relatives. But strip away the ideologies for a moment, says John Horgan, a researcher of violent extremism. Instead, look at the psychological processes, the pathways, the roots, the experiences.”

These ultrawealthy politicians have avoided paying taxes for years

“Despite a net worth estimated to be in the hundreds of millions, [Colorado Gov. Jared] Polis paid nothing in federal income taxes in 2013, 2014 and 2015. From 2010 to 2018, his overall rate was just 8.2% — less than half of the 19% paid by a worker making $45,000 in 2018,” ProPublica's  Ellis Simani, Robert Faturechi and Ken Ward Jr. report.

“The revelations about Polis are contained in a trove of tax information obtained by ProPublica covering thousands of the nation’s wealthiest people. [Polis] is one of several ultrarich politicians who, the data shows, have paid little or no federal income taxes in multiple years, exploited loopholes to dodge estate taxes or used their public offices to fight reforms that would increase their tax bills.”

The Biden agenda

Biden: Payments to families separated at the Mexico border are ‘not gonna happen’

“President Biden said the U.S. wasn’t going to pay immigrant families who were separated at the Mexico border during the Trump administration, throwing into doubt settlements the Justice Department has been negotiating to resolve legal claims by the families,” the Wall Street Journal’s Aruna Viswanatha, Sadie Gurman and Andrew Restuccia report.

The Fed is overwhelmingly White. Will Biden address that?

During the Fed’s 108-year history, only three African Americans have been appointed to the Federal Reserve Board of Governors. The diversity dearth also is reflected in influential positions not filled by presidential appointments. In the history of the 12 Fed-affiliated regional reserve banks, only one Black person, Raphael Bostic in Atlanta, has been a regional president and CEO. The New York Times reported in February that only 0.5 percent of the Fed’s 417 economists were Black. A doctorate is required for the job,” columnist Joe Davidson writes.

The COP26 blame game

“President Biden returned home from the United Nations climate summit Wednesday, having used the opening days of the conference here to try to paint China and Russia as isolated holdouts to a global consensus over fighting climate change,” WSJ’s Timothy Puko and Andrew Restuccia report.

“The president has staked his legacy at home and abroad in part on his ability to rally the international community to address climate change. But Washington and allies such as the U.K. and the European Union failed to get China, Russia and other big polluters to strengthen what the West sees as too-modest emissions-cutting commitments ahead of the summit, called COP26.”

Virginia’s regions winning margins, visualized

In Virginia, “most of the largest vote shifts appeared in counties where Democrats in prior elections built unassailable vote margins, the large metro areas that reach from Arlington and Alexandria on the District’s border, down through Richmond, and then to the Hampton Roads region. It’s a small number of the state’s counties, but home to a large majority of Virginia voters, and until this election, increasing Democratic margins.” Our colleagues analyze further how Youngkin shifted the vote toward Republicans.

Hot on the left

Did the media get the billionaires income tax wrong?

“Journalists framed the billionaires income tax as probably unworkable (Reuters), presumptively unconstitutional (Time), and a novel or even radical departure from the income tax as we know it (The New York Times and Fortune, respectively). Sen. Joe Manchin (D-WV) branded it “divisive”—a characterization reported uncritically across many sources.”

“We are tax law professors, not journalists. But we can say with complete confidence that the billionaires income tax is none of these things. Any honest discussion, in the context of ongoing reconciliation negotiations or further in the future, should begin with this context: The proposed tax is a partial fix within a system defined by complexity and unfairness, which has led to hourly wage earners and salaried professionals paying far higher rates of tax than billionaires.”

Hot on the right

The light touch of Youngkin’s Trump approach

“As they try to net the single additional seat needed to take back control of the Senate, Republicans are looking to Youngkin as a floor for how to deal with the former president — with [Marco] Rubio's easy Trump embrace as the ceiling,” Politico's Burgess Everett reports.

“Youngkin is ’very deft for somebody who hasn’t run a campaign before, in understanding the importance of the Trump voters out there to his coalition,' said Sen. John Thune (R-S.D.), the GOP whip. 'It’s a good playbook. Hopefully, our candidates can sort of watch and learn.’”

Today in Washington

Principal deputy press secretary Karine Jean-Pierre will brief at 2 p.m.

In closing

If you haven’t been following the Aaron Rodgers news, catch up with Mark Maske’s reporting here. Lots of takes out there, but here’s maybe the only good one.

Thanks for reading. See you tomorrow.