Senate Votes to Eliminate Tax Deduction Used By 44 Million Americans

In a party-line vote, the Senate scrapped state and local tax deductions on Thursday.

By a 52-47 vote, the GOP-controlled Senate voted to eliminate the deductions – used by about 44 million Americans, saying they don’t help low-income households, The New York Post reports.

Author Sen. Shelley Moore Capito (R-W.Va.) said that the state and local tax (SALT) deduction “disproportionately benefits the wealthy and high-earners.”

Eliminating the tax break would allow the feds to keep $1.3 trillion over 10 years. Money that “would be better spent on relief for the middle-class, working class folks,” Capito said, citing those who make $50,000 or less.

On the other side, a Democrat-sponsored bill to keep the deductions failed by the same margin, a party-line vote of 47-52.

Democrat Maryland Sen. Chris Van Hollen said he was disappointed in the vote and said he thought Republicans would come around once more Americans realize how much money this could cost them. He tweeted a calculator to determine the cost of the proposal – back by President Donald Trump.

“The more people around the country focus on this and do the calculation and realize they are going to get screwed by it, then maybe this debate will change a little bit,” he said.

Of the 44 million tax filers who claimed state and local tax deductions in 2013, 38.8 million had household incomes of $200,000 or less, according to the Tax Policy Center. The major benefactors of the tax deduction live in high taxed states, like New York and California, where $200,000 doesn’t go as far.

Backers of the SALT deduction pledged to keep up the fight as the tax reform legislation is devised in the House and Senate committees. They argue Trump’s tax plan is unfair because it allows corporations to deduct state and local taxes but eliminates the breaks from average tax filers.

New York Sen. Chuck Schumer, a Democrat, reacted to the news. “Did you hear that?” he asked on the Senate floor Thursday. “Corporations can claim it, individuals can’t. Isn’t that backward? It shouldn’t be taken away from either one.”

But the White House defended its plan saying if employers couldn’t deduct their local and states taxes they’d go “out of business.”

“In order to not drive firms out of business, one needs to allow firms to deduct all of their costs,” Kevin Hassett, chair of the Council Of Economic Advisers, told The Post.

The goal of the Trump tax plan is to deliver a tax break to middle income families by lowering rates and doubling the standard deduction, Hassett said. He said he’s confident once the legislation is finalized American families will have about $4,000 more in their pockets.

Meanwhile, moderate House Republicans have been pushing for a compromise by eliminating the state and local tax deduction just for the wealthy but keeping it for middle-income families. Rep. Peter King (R-L.I.) suggested the tax break should be extended to those making up to $400,000.

The White House’s Hassett said he’s unclear what income brackets Trump had in mind when he promised a “middle class miracle.” But the economist noted the middle income quintile technically is defined as households making between “$40,000 and $70,000.”

What do you think? Do you claim the deduction? How much would it cost you? Do you agree with President Trump? Sound off below!