Democrats in the Senate attempted and failed to loosen the $10,000 cap on state and local tax deductions yesterday. This seems odd because the burden of the cap falls heavily on wealthy taxpayers, and since the Bush administration Democrats haven’t given an inch when it comes to lower taxes on wealthier Americans. The problem with the cap may arise for Democrats in that it hits the wealthy in high-income tax, Democrat voting states the hardest. In other words, Democrat politicians’ donors. Richard Rubin reports in The Wall Street Journal:
Full repeal of the cap would deliver more than half the benefits to the top 1% of households, according to the Tax Policy Center, a Washington group run by a former Obama administration official. That impact could be offset by raising top tax rates across the board or making other progressive tax changes, Democrats have said.
Still, Democrats from the Northeast may have trouble persuading those from lower-tax states to back any plan that would shift the federal tax burden from high-income New Yorkers to high-income Floridians.
Read more here.
