- Democrats at the state level are making it harder for Biden to roll back "trickle-down economics."
- The Wall Street Journal reports that 20 states set up measures to bypass a Trump-era tax on wealthy.
President
Congressional Democrats are in the midst of sketching out a proposal to provide relief from the $10,000 limit on the state and local taxes taxpayers are able to deduct from their federal bill (
Perhaps for this reason, lawmakers at the state level have been busy designing paths for business owners to bypass the $10,000 cap. The Wall Street Journal reported on Monday that 20 states, including the deep-blue
There is no record of President Ronald Reagan ever using the term "trickle down," per Investopedia, which also notes that he embodied it in practice by reducing taxes on the wealthy, in the hopes that the benefits would "trickle down" in the form of increased business activity.
The Journal's reporting shows that at the state level, trickle down is alive and well.
"This is becoming the thing the cool kids are doing, if you're a state," Howard Gleckman, a senior Tax
Some law firms and private equity firms are taking advantage of the workaround, such as Simpson Thacher & Bartlett and Cerberus Capital Management, the Journal reported, citing people familiar with the matter. Neither firm immediately responded to Insider's request for comment.
The provision varies across states, but typically, taxes are levied on certain businesses equivalent to that of their owners. They're deducted and the rest of the income goes to owners, the Journal reported. State laws then provide relief to income tax obligations that's separate from business income, so it's not subject to the SALT cap.
Meanwhile, Senate Democrats are struggling to achieve a compromise on SALT, which could hobble their goal of approving Biden's $2 trillion social spending plan by Christmas. Any rollback is bound to disproportionately benefit wealthier Americans who are better positioned to take advantage of the deduction.