Source: Nworeport

The most costly item over the first half-decade of President Joe Biden’s climate and social spending legislation is a tax reduction for the rich.

The Democratic Build Back Better Act, which passed the House on Friday morning, increases the current $10,000 cap on federal tax deductions for state and local taxes to $80,000, a step that points to a notable tax cut for the wealthy in states with high taxes.

The provision dwarfs numerous other priorities in the legislation and was added under pressure from a vocal contingent of Democrats from high-tax blue states.

The nonpartisan Committee for a Responsible Federal Budget announced that raising the SALT cap to $80,000 through 2025 would end up costing the federal government $275 billion in revenue — a sum that is $5 billion more than the next most expensive provision in the Build Back Better Act.

The Joint Committee on

Taxation assessed Friday that the SALT cap change in the bill that the House passed would cost roughly $230 billion over the first five years. Over the next decade as a whole, the change is actually projected to produce over $14 billion after the cap is returned to the $10,000 level in 2027. The effects of major legislation are usually analyzed on a 10-year basis. Though the raised SALT cap could be made permanent, as proponents wish, or it could be otherwise changed.

Thanks to the enlarged SALT cap, the Democratic bill would provide tax reductions to most high-income earners, notwithstanding other notable tax hikes in the bill aimed at the rich. In its first year, 70% of millionaires would get tax breaks, according to the JCT’s analysis issued Friday, and roughly half of the millionaires would get tax cuts in the last year before the cap came back down.

While the SALT cap provision is the most expensive over the

five-year time frame, other provisions are more costly over a one-year budget window or over a decade, a reflection of Democratic attempts to reduce the overall cost of the legislation on paper.

For instance, the extension of the increased child tax credit will cost the Treasury $100 billion for only one year, according to the JCT, more than the SALT cap provision. Though the increased child tax credit is just being extended for one year, meaning that the five-year cost is lower than that of the SALT cap increase.

And over the course of the decade, the Democratic changes to the SALT cap actually increased taxes — on paper. That’s because the current $10,000 cap, which was presented as part of the 2017 Republican tax cuts, is supposed to expire in 2026. Still, the Democratic legislation would make the $10,000 cap permanent after 2027, suggesting that it would raise revenues in the years 2027 through 2031.