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But it doesn’t have to be—if Democrats can find a way to give relief to middle-class Democrats in high-tax states without rewarding the rich in the process.
A little history is in order here to understand why some Democrats in high-tax states like New Jersey and New York are so intent on restoring SALT. Before President Trump took a wrecking ball to SALT, there was no ceiling on how much you could deduct in state and local taxes on your federal income tax return. Limiting the deduction to $10,000 “will kill New York,” then-Governor Andrew Cuomo said in 2017.
That was the point, it turned out. Trump wanted to punish the blue states that didn’t vote for him by constraining those governors from raising taxes if their constituents weren’t able to write off those taxes.
Now, in order to win the votes of House Democratic moderates who represent high-earning districts mainly in New York and New Jersey, the Build Back Better bill takes the cap on deducting state and local taxes from $10,000 to $80,000, an eight-fold increase that would give millionaires and billionaires a big fat tax break that if enacted into law goes against everything progressives in the House and Bernie Sanders in the Senate have been fighting for in the battle for income equality and fair taxation.
As it now stands, the tab for SALT is the biggest single agenda item in the BBB bill working its way through the Senate. The $10,000 cap is too low and penalizes some genuinely middle-class families, but Bernie is right that anybody who’s paying tens of thousands more than that in state and local taxes qualifies as wealthy and shouldn’t be able to write those off on their federal returns as a result of a provision inserted to win over a handful of holdouts for a bill designed to help middle-class families.
"Beyond unacceptable,” says Sanders. "At a time of massive income and wealth inequality, the last thing we should be doing is giving more tax breaks to the very rich. Democrats campaigned and won on an agenda that demands that the very wealthy finally pay their fair share, not one that gives them more tax breaks.”
Sanders’ sentiment is widely shared, and not just among progressives. “It’s very hard to find an item that is both bad policy and bad politics, and with unerring aim, the Democrats have hit one,” says Bill Galston, a senior fellow in the governance program at the Brookings Institution.
It’s not new of course to offer goodies to gain votes, but when it’s this blatant, and the payout is this excessive, the expectation is that the provision will be scaled back in the Senate.
Sanders wants everyone earning below the $400,000 threshold that President Biden has set to be able to fully deduct their state and local taxes while phasing out the deduction for higher earners. “80 and 10, these are negotiating positions, they will come down to where... I don’t know— [Sen. Chuck] Schumer will have a lot to say,” says Matt Bennett with Third Way, a moderate Democratic group.
A New Yorker who has gotten an earful about SALT, Majority Leader Schumer is up for re-election next year “so it’s certainly on his radar,” says Shai Akabas with the Bipartisan Policy Center. “There are political considerations among people who have a lot of constituents who have been impacted by the $10,000 cap—upper-income people who happen to be strong participants in the electoral process, who give campaign contributions.”
This is the Democrats’ dilemma: whether to be true to their principles or bow to the realities of politics in an election cycle where moderates representing higher-income swing districts are endangered unless they deliver for their constituents, and that means substantially altering SALT.
Democrats are seeking that elusive sweet spot that placates the party’s high earners and big donors without being totally hypocritical. Under the 80K threshold, people in the top federal income tax bracket, which is 37 percent, would be able to deduct $70,000 more of SALT which translates into a $25,900 tax benefit, says Seth Hanlon, a tax expert with the liberal Center for American Progress. A Wall Street trader making $10 million a year is already paying way more than $80,000 in income tax in New York City, says Hanlon. “It’s unnecessary for extremely wealthy people to receive a $26,000 tax cut, they’re not even going to notice it, and it definitely goes against the principle of no tax breaks for millionaires and billionaires.”
A student asked New Jersey Senator Cory Booker early this year during a virtual discussion at Rider University when he would fix SALT because it was hurting his parents and their ability to help pay his tuition. Booker responded with a basketball analogy, saying that he had thought that once a Democrat was in the White House, it would be an easy lay-up. But now he saw it as a three-point shot—harder but still doable.
Everybody making under $400,000 should be able to fully deduct SALT. The argument is how much to give people above that dividing line. It’s unclear how dug-in the House moderates are, and whether their position can stand the light of day. The assumption is that they will land with Schumer, who faces the same pressures they do.
Currently known as B.1.1.529, the newly identified variant has now been detected in South Africa, Botswana, Hong Kong and Belgium. (photo: Getty)
Currently known as B.1.1.529, the newly identified variant has now been detected further afield in Botswana, Hong Kong and Belgium.
It appears to be spreading rapidly in parts of South Africa and scientists are concerned that its unusually high number of mutations could make it more transmissible and result in immune evasion.
"Initially it looked like some cluster outbreaks, but from yesterday, the indication came from our scientists from the Network of Genomic Surveillance that they were observing a new variant," Minister of Health Joe Phaahla said Thursday, stressing that it is currently unclear where the variant first emerged.
South African officials initially said there was one confirmed case in a traveler from South Africa to Hong Kong. Then Hong Kong health authorities on Friday identified a second case of the B.1.1.529 variant among returning travelers on the same floor of a designated quarantine hotel.
Also on Friday, the Belgian government said that one individual who had recently arrived from abroad, and was not vaccinated, had tested positive for the new variant, marking the first case in Europe.
Tulio de Oliveira, the director of South Africa's Center for Epidemic Response and Innovation, said the variant has "many more mutations than we have expected," adding it is "spreading very fast and we expect to see pressure in the health system in the next few days and weeks."
Viruses, including the one that causes Covid-19, mutate regularly and most new mutations do not have significant impact on the virus's behavior and the illness they cause.
The World Health Organization (WHO) will hold a meeting on Friday to decide whether the B.1.1.529 variant should be considered one "of interest" or "of concern," designations that signify the amount of risk that it could pose to global public health. WHO added it would "share further guidance for government on actions they can take."
What we know about the new variant
Lawrence Young, a virologist and a professor of molecular oncology at Warwick Medical School in the United Kingdom, said the variant was "very worrying."
"It is the most heavily mutated version of the virus we have seen to date. This variant carries some changes we've seen previously in other variants but never all together in one virus. It also has novel mutations," Young said in a statement.
The variant has high number of mutations, about 50 overall. Crucially, South African genomic scientists said Thursday more than 30 of the mutations were found in the spike protein -- the structure the virus uses to get into the cells they attack.
Neil Ferguson, the director of the MRC Centre for Global Infectious Disease Analysis at Imperial College London, said in a statement that the number of mutations on the spike protein was "unprecedented."
"The spike protein gene [is] the protein which is the target of most vaccines. There is therefore a concern that this variant may have a greater potential to escape prior immunity than previous variants," Ferguson said.
Sharon Peacock, a professor of Public Health and Microbiology at the University of Cambridge, said that while the overall number of Covid-19 cases is relatively low in South Africa, there has been a rapid increase in the past seven days.
She said that while 273 new infections were recorded on November 16, the figure had risen to more than 1,200 cases by November 25, with more than 80% coming from Gauteng province.
"The epidemiological picture suggests that this variant may be more transmissible, and several mutations are consistent with enhanced transmissibility," Peacock said in a comment shared by the UK's Science Media Centre.
She added that while the significance of the mutations and their combination is unknown, some of those present in the latest variant have been associated in others with immune evasion.
What we don't know
Peacock, de Oliveira, Ferguson and other scientists said it was too early to tell the full impact of the mutations on vaccine efficacy.
De Oliveira stressed that the shots are still the best tool against the virus, adding that lab studies still need to be carried out to test vaccine and antibody evasion.
More studies also need to be conducted to understand the clinical severity of the variant compared to previous variants.
It is also unclear where the new mutation emerged from. While it was first identified in South Africa, it may have come from elsewhere.
"It is important not to assume that the variant first emerged in South Africa," Peacock said.
Quick reaction
Scientists have praised South African health authorities for their quick reaction to a Covid-19 outbreak in the country's Gauteng province, which led to the discovery of the new variant.
When cases in the province started to rise at a higher rate than elsewhere, health experts focused on sequencing samples from those who tested positive, which allowed them to quickly identify the B.1.1.529 variant.
Peacock said the South African health ministry and its scientists "are to be applauded in their response, their science, and in sounding the alarm to the world."
She added that the development shows how important it is to have excellent sequencing capabilities and to share expertise with others.
The reaction to the announcement of the new variant discovered by South African health authorities was also prompt. A number of countries have imposed new travel bans and markets in the US, Asia and Europe took a plunge following the news.
UK officials announced on Thursday that six African countries will be added to England's travel "red list" after the UK Health Security Agency flagged concern over the variant.
UK's Health Minister Sajid Javid said flights to the UK from South Africa, Namibia, Lesotho, Botswana, Eswatini and Zimbabwe will be suspended from midday Friday and all six countries will be added to the red list -- meaning UK residents and British and Irish nationals arriving home from those points of departure must undergo a 10-day hotel quarantine at their own expense.
Speaking on Friday, Javid said it was "highly likely" that the B.1.1.529 variant has spread beyond southern Africa. In a statement to the UK House of Commons Friday Javid expressed concern that it may "pose a substantial risk to public health."
Singapore, Japan, Malaysia, the Philippines, Israel, Jordan, Italy, Austria, France, the Netherlands and Germany have also announced new restrictions on travelers coming from the region, and the European Commission proposed banning flights from South Africa to the bloc.
The Emirates airline said on Friday it would restrict flights from the region to Dubai, citing Dubai's Covid-19 Command and Control Centre (CCC).
Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told CNN on Friday that the United States will make a decision as quickly as possible on blocking travel from some African countries in the light of the new variant.
South Africa, like much of the region, has suffered through three significant Covid-19 waves since the pandemic's start. While the number of new infections across the country is now still relatively low and positivity levels are under 5%, public health officials have already predicted a fourth wave because of a slow vaccine uptake.
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