Rep. Tom Suozzi of New York is a centrist Democrat from suburban Long Island who has spent recent weeks attacking the left and is likely to quit Congress altogether within a matter of days, ahead of a likely 2022 campaign for governor. But for his last act in the House, Suozzi wants to jam through a massive tax break that disproportionately favors wealthy homeowners in a handful of liberal states. Progressives are fighting back against expanding this tax deduction, known as SALT, and Suozzi is furious. "SALT is a very progressive policy," he told Salon in a heated phone interview.
Suozzi, the vice-chair of the bipartisan Problem Solvers Caucus, has repeated his "No SALT, no deal" mantra for months, in reference to President Biden's Build Back Better package. Now he's frustrated that his proposal, an $85 billion annual tax cut that would overwhelmingly flow to the top 5% of earners, is being watered down in Congress to make room for key Democratic priorities. He's furious that his state got screwed by the Trump tax cuts. He's angry that the rich, he says, are leaving New York's high tax rates for Republican tax havens like Florida. And he's had it with "phony-baloney" narratives on the left, and insists that a tax break designed to keep wealthy people in Northeast Corridor states, where their taxes fund the Democratic agenda, is a "progressive" policy.
A group of moderate Democrats from high-cost, high-tax states, led by Suozzi and Rep. Josh Gottheimer of New Jersey, has issued a last-minute ultimatum demanding a roll-back of the cap on the State and Local Tax deduction or SALT. That cap was a Trump-era policy change that limits the amount high-earners may deduct from their federal taxes (to offset local taxes) to $10,000. This internal battle over a poorly-understood provision of tax policy has left Democrats with a big narrative problem.
Democratic leaders have claimed for months that Biden's signature spending proposal would be funded by rolling back the 2017 Trump tax cuts on rich and corporations. But after Sen. Kyrsten Sinema, D-Ariz., torpedoed that plan — despite having previously campaigned on exactly that issue, one of the only aspects of the 2017 Republican tax bill that Build Back Better may actually reverse is a tax hike that mostly affected families and individuals with incomes above $250,000.
Suozzi defended the potential rollback in his interview with Salon: "In addition to the fact that this money goes to middle-class families as well as wealthy families," he said, "this is about not chasing people out of our high-tax states to these low-tax states."
Economists on both sides of the aisle have rejected the claim that the SALT deduction benefits the middle class, pointing to years of research showing that most of its benefits are concentrated among top earners.
"I guess it depends on what you mean by middle-class," said Howard Gleckman, a senior fellow at the nonpartisan Urban-Brookings Tax Policy Center. His group defines middle-income as those making between 40% and 60% of the country's income distribution, or a range of roughly $50,000 to $100,000. The median salary in the U.S. last year was around $67,500, according to the Census Bureau.
"Middle-class in New York is very different than middle-class in Oklahoma or Iowa or North Dakota," Suozzi argued. "In New York, a person who's making $120,000 a year or a family that's making $150,000 a year or $200,000 a year is middle-class, whereas in some of those other places they'd be considered wealthy people."
This appears to be a question of perception: People at that income level may well consider themselves middle-class, given New York's inflated cost of living. But in fact, the median salary in New York in 2019 was only $39,000 and average household income was under $69,000, according to census data. In New York City, which has one of the highest rates of income inequality in the U.S., average household income is even lower, at around $64,000. But it's certainly true that Suozzi's suburban constituents are much better off. His Long Island district, one of the most affluent in the nation, boasts a median income of more than $126,000.
Gottheimer, the informal co-leader of the SALT cap repeal coalition, has made similar arguments. A spokesman for the congressman told Salon: "The average property tax in Vermont is $4,300, but in New Jersey's Fifth District, the average property tax is more than $15,000 — making the State and Local Tax deduction a middle-class issue.
Other supporters of the SALT push have made even higher estimates. Rep. Tom Malinowski, another New Jersey Democrat, has said that people earning more than $400,000 per year "would not be considered wealthy because of the cost of living" in districts like his. Malinowski, who wrote a proposal to raise the cap to $72,500 before it was bumped again to $80,000, represents a suburban northern New Jersey district where the average household income is more than $115,000, according to census data.
But the size of the potential increase in the cap suggests that benefits will flow to people making far more than that.
"There are very few people in the middle class who are paying between $72,500 and $80,000 in state and local taxes," Gleckman said. "This marginally changes things for very, very high-income people, people making $500,000 or $600,000 a year, but it doesn't do anything for middle-class people."
Democrats won't be able to sell this plan to voters, he said. "Maybe they can in Short Hills, New Jersey. But they can't in most of the country. People are just not going to buy it."
Suozzi is a longtime favorite of some of New York's wealthiest residents — and he's made no secret of the fact he has higher aspirations. Real estate developers and government contractors sent big donations to Suozzi when he served as executive of Nassau County executive, just east of New York City, which includes many of the region's most affluent towns. His failed 2006 Democratic gubernatorial primary campaign against then-state Attorney General Eliot Spitzer — who was known at the time as crusader against Wall Street corruption — was largely funded by Home Depot co-founder Ken Langone, a top Republican donor and former member of the New York Stock Exchange who was being sued by Spitzer at the time.
Suozzi said last week that he was "seriously considering" another run for governor, this time against Democratic incumbent Kathy Hochul, who only holds the seat because Andrew Cuomo was forced to resign amid a widening sexual harassment scandal. Suozzi is expected to make an announcement by the end of the month. The last time he ran for governor he even hinted at presidential ambitions.
During his interview with Salon, Suozzi touted his political experience in New York, where he has been a political mainstay for nearly three decades. Now a three-term congressman — whose son plays pro baseball for the Brooklyn Cyclones, a minor-league team affiliated with the New York Mets — Suozzi was previously mayor of Glen Cove, where both his father and an uncle were mayors before him.
He went on to lead Nassau County government, bolstering a reputation as a fiscal-minded centrist who won Republican-dominated areas and helped boost the struggling suburban economy. Suozzi was famous (or notorious) in the 2000s for his feud with then-State Assembly Speaker Sheldon Silver and what Suozzi called his "Fix Albany" campaign, which targeted numerous longtime incumbent state lawmakers and ultimately made him a pariah in the New York Democratic Party, which at one point barred Suozzi from being a delegate at the Democratic National Convention. After losing his 2006 race to Spitzer by 62 points, Suozzi lost his Nassau County seat to a Republican in 2009 and then lost a 2013 rematch.
After a stint at the investment banking giant Lazard, Suozzi made a triumphant comeback in 2016, winning his House seat after a tight five-way Democratic primary. His third term in Congress has been primarily focused on two things: Battling the rising progressive tide that has brought down several incumbent New York Democrats, and repealing the SALT cap.
Despite his own mixed electoral record as an avowed centrist, Suozzi has blamed last week's Democratic defeats in Virginia and elsewhere on the "far left." He has proudly said that he was the only prominent New York Democrat who supported Buffalo Mayor Byron Brown's write-in campaign over the actual Democratic nominee, socialist India Walton, whom Suozzi called an "extremist" for wanting to shift funding from the police department to social services.
"We have to stand up to the far left because that message from the democratic socialist wing of the party is destroying the party," Suozzi said last week.
Suozzi has framed the moderates' fight against the progressive left as a battle for the survival of the party, comparing Senate Budget Committee Chairman Bernie Sanders, I-Vt., to Donald Trump. During a Zoom call last week, Suozzi urged democratic socialists to "form a new party instead of trying to change the Democratic Party."
"If we let them win, we will lose everything," he said during a speech in Buffalo last month, urging supporters to "defeat the socialists."
Suozzi is certainly not the only Democrat blaming the party's obvious electoral problems on progressives. And he has even more Democratic friends in his corner in his battle to roll back the SALT cap, an issue that has divided the party along different lines than the typical moderate-progressive divide. The ragtag coalition of Democrats from high-tax states includes both progressives and moderates, along with leaders like House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Chuck Schumer, D-N.Y.
They argue that their constituents got screwed just because they earn a lot of money in blue states. But none have been more vocal than Suozzi and Gottheimer, the co-chair of the bipartisan Problem Solvers Caucus, who has thrown up roadblocks all along the way in Build Back Better negotiations. Suozzi and Gottheimer have made their "No SALT, no deal" mantra a mainstay in Capitol Hill press statements since the summer — and Suozzi even threatened to publish a list of individual New Yorkers who donate to candidates that oppose the SALT cap repeal, accusing them of "funding their own demise."
"People leaving New York, they say 'Listen, we can't take these taxes anymore,'" Suozzi told Salon. "And the cap of the State and Local Tax deduction is making it even harder to live here. We're having a race to the bottom in America where people are leaving our states and going to these lower-tax jurisdictions."
Suozzi also argued that progressives should get behind the SALT cap rollback because the state's wealthy residents support a high tax base that funds progressive priorities.
"Taxes are higher because we have unions," he said. "We pay teachers more money because we value our future. And that causes us to have higher property taxes or income taxes to pay for state aid. And we have the lowest rates of uninsured children and uninsured adults because we opted into the Affordable Care Act and went as far with it as we could. We have this major mass transit system that's very good for the environment but it's also very good for the economy."
If the wealthy leave New York, he said, the state would either have to raise taxes even more or cut progressive programs. "So we should be supporting SALT so we can help our progressive states."
Suozzi argued, correctly, that "New York is the biggest net donor to the federal government of any state in the United States of America," pointing to a Rockefeller Institute study showing that New York taxpayers paid $142 billion more to the federal government than they got back. "It's just not fair that people are taxed on the taxes they've already paid," he said.
The SALT cap was pushed by conservative think tanks like the Heritage Foundation for decades, he said, to "pressure progressive states not to be progressive. Let's remember that this was Donald Trump and the Republican majority in the House and the Senate that put this in place. It was a conscious decision to hurt those states that didn't vote for Donald Trump and the Republican majority."
There are some progressive lawmakers who support lifting the cap, including Bernie Sanders, although he has said that while that's better than repealing the cap entirely, this proposed fix "still is quite regressive."
Columnist and former Sanders adviser David Sirota went further, comparing the Democratic push for SALT relief to the "Repubicans' estate tax lie."
"The GOP dishonestly depicted estate tax cuts for billionaires as a way to help farmers," Sirota said in an email. "Democrats are dishonestly portraying SALT tax breaks that mostly benefit the wealthy as a way to help the middle class. In reality, Democrats are using odes to the middle class as a veneer to pass giant tax breaks for their big donors."
Gleckman agreed with Suozzi's argument that the SALT cap disproportionately hurt high earners in high-tax states, but added, "It's important to keep in mind that even people in New York and high-tax blue states got a tax cut from the Tax Cuts and Jobs Act. We're not talking about some punitive tax on upper-middle-income people in high-tax states. They actually got a tax cut — it just wasn't as big as some other people got."
Suozzi has for months pushed a total repeal of the cap, which would cost taxpayers about $85 billion per year, according to the nonpartisan Committee for a Responsible Federal Budget (CFRB). If the cap were fully repealed, 86% of the benefits would go to the richest 5%, according to the left-leaning Institute on Taxation and Economic Policy (ITEP), and just 4% of the benefits would flow to the bottom 80%, according to the left-leaning Center on Budget and Policy Priorities.
Concerned about the optics of a tax cut for the rich in Biden's signature spending proposal, Schumer floated a proposal to suspend the cap for five years — which would cost the government more than any other specific measure in Biden's proposal, according to the CRFB.
"The bill would do more for the super-rich than it does for climate change, child care or preschool," warned Jason Furman, who served as former Barack Obama's top economic adviser. "That's obscene."
Malinowski and Rep. Katie Porter, D-Calif., a fan favorite on the left, introduced a different compromise that would lift the cap from $10,000 to $72,500. House Democrats ultimately agreed to an amendment that would increase the cap from $10,000 to $80,000 until 2030 and reinstate the $10,000 cap in 2031. (Gottheimer has essentially admitted that the reinstatement is likely a fake, saying, "I think it's pretty clear when they get tax relief it's going to be hard to take that back.")
The value of the increase from $72,500 to $80,000 is "larger than the entire Child Tax Credit expansion for a middle-class family with two children," Furman observed.
"This increase alone will go almost exclusively to households making over $1 million," he tweeted. "Why are they doing this?"
A Tax Policy Center analysis, based on a similar proposal found that only about 1.6% of middle-class families earning between $54,000 and $96,000 would receive any benefit, with the average middle-income family seeing a tax break of just $20. About half the benefits would go to households earning between $254,000 and $366,000. While the compromise still caps the potential tax savings for the country's top earners, the top 0.1% would see an average tax cut of about $16,000.
Some media outlets have reported that Democrats were considering expanding the alternative minimum tax to reduce the windfall from the tax break for the wealthy, but one House Democrat familiar with those discussions told Salon that proposal has been tabled. And while a rollback of the Trump tax cuts has also fallen to the wayside, Democrats currently plan to include a surtax on millionaires, a minimum corporate tax and increased IRS enforcement.
Suozzi said he's not a fan of the current proposal but will support it as part of Biden's agenda.
"I would much prefer a full repeal, which is what I've been advocating for since the beginning," he said. "But I'm willing to support this because there are a lot of other things in the Build Back Better agenda that I also support, like addressing climate change, lifting children out of poverty and a whole host of other progressive policies that I want to see get done. … I'm willing to compromise," he said, because the overall package "will be a big victory" for the middle class and unions.
But Suozzi's argument has not won over enough Democrats to pass in the Senate.
"This bill should invest in our families and our future — not provide giveaways for the wealthy few," tweeted Sen. Michael Bennet, D-Colo. "The House's SALT proposal cuts taxes for millionaires and billionaires on the backs of low-income and middle-income families. We should fix this in the Senate."
Some economists on the left have thrown support behind a plan brewing in the Senate.
"The good news is that the House Dems seem to have backed away from fully repealing the SALT cap, which would have been a huge tax break mainly going to the richest 1%," said Steve Wamhoff, the director of federal policy at ITEP. He favors a proposal by Sanders and Sen. Bob Menendez of New Jersey that "would cost less and it would provide very little to the richest one percent."
In a statement, Sanders said that he believes the $10,000 cap is "much too low" but added that "multimillionaires and billionaires who own mansions in exclusive neighborhoods, and who can afford to make extremely expensive purchases, do not need a tax break." His proposed plan with Menendez would lift the cap entirely, but only on those earning between $400,000 and $550,000.
In a news conference last week, Sanders said the House proposal was "not an acceptable compromise" because 37% of the benefits would go to the top 1%. "At a time when Democrats are correctly demanding that the wealthy finally pay their fair share of taxes," he said, "it would be absurd and hypocritical to provide the richest people in the country with a massive tax break."
For his part, Suozzi said he won't back the Senate proposal. "It creates a cliff," he said. "If somebody makes $400,000 a year it's okay but if they make $401,000 per year that doesn't make sense and I disagree with the policy."
This relatively abstruse House-Senate beef underscores the "difficult spot" the Democrats find themselves in during the final stretch of Build Back Better negotiations, Gleckman said, as popular proposals like paid family leave have been set aside due to cost concerns.
"We're in a situation now," he said, "where many of the tax dedications that we used to think of as middle-class or middle-income, like the mortgage interest deduction and charitable deduction, are really only for rich people because almost nobody itemizes [tax returns] anymore. So what you're really talking about here is playing around with the tax bills of people who are in the top 10%."
This entire fight is about the party leadership's need to "satisfy a relatively small number of Democrats," he said. "Anything they do just to address the SALT cap is going to be extraordinarily regressive."