Pelosi faces opposition from Democrat over restoring tax cuts for wealthy blue state residents

House Speaker Nancy Pelosi is facing stiff opposition from a key moderate House Democrat over plans to include a lucrative tax break for wealthy blue state residents in President Biden’s multitrillion-dollar social welfare bill.

Rep. Jared Golden, Maine Democrat, penned a letter to House leadership on Thursday urging lawmakers to oppose an expansion to the state and local tax (SALT) deduction. Mr. Golden, who represents a district increasingly trending toward Republicans, argued that any “increase in this tax break would disproportionately benefit the wealthy.”

“Congress has a choice: we can enact a tax cut for the wealthy, or we can pay for historic investments for America’s working and middle classes,” Mr. Golden wrote.

SALT allows individuals to write off a portion of their annual state and local taxes. The lucrative deduction is used by residents from predominantly Democratic coastal areas, where the state and local tax burdens are especially high.

Former President Trump’s signature 2017 tax overhaul capped the deduction at $10,000 annually. House Democrats have included language in Mr. Biden’s social welfare bill raising the cap to $80,000.

“This isn’t about who gets a tax cut, it’s about which states get the revenue they need to meet the needs of the people,” said Mrs. Pelosi, California Democrat.

The impact of expanding SALT will disproportionately benefit higher-income taxpayers, according to the Joint Committee on Taxation (JCT), while punishing those in the lower and middle class.

In a report released this week, the JCT found that people making between $200,000 to $500,000 would see a 12.7% tax cut starting in 2023 if SALT is expanded. That same year, individuals making between $500,000 to $1 million would see a tax decrease of 35.5%.

The figures only increase in 2025, when individuals making between $500,000 to $1 million would see a net tax cut of 46.4% because of SALT. People making between $50,000 to $100,000, however, would continue to see an overall tax hike.

“If you’d told me a year ago that the second-biggest piece of a signature bill of this Congress was $280 billion in tax giveaways to millionaires,” said Mr. Golden, “I’d have told you the Republicans were in charge.”

“The fact that more people and organizations on the Democratic side aren’t up in arms about this is wild,” he said.

Mr. Golden remains undecided on whether to support the social welfare bill when Mrs. Pelosi brings it to a floor vote later this week. His opposition could prove fatal for the package, given that House Democrats only have a narrow three-seat majority in the chamber.

Yet Mrs. Pelosi also cannot just simply appease Mr. Golden and others concerned about SALT by stripping it from the package. Nearly two dozen Democrats have threatened to tank the bill without an expansion of the tax break.

 “No SALT, no dice,” said Rep. Josh Gottheimer, New Jersey Democrat.