Electric Cars for Everyone? Not Unless They Get Cheaper.

The people here are not Hollywood stars or billionaire tech entrepreneurs who might own Ferraris and private jets. But they are well off. The median household income in the area exceeds $165,000, and half the homes are valued at more than $1 million. Eight in 10 residents have at least an undergraduate degree. As early buyers with high incomes, they can easily take advantage of the federal E.V. tax credit.

The incentives are, in effect, “subsidizing my luxury,” said Mr. Teglia, who also has solar panels on his home. The Model 3s he owns sell for about $40,000 before government incentives.

Dr. Jack Hsiao, an obstetrician-gynecologist, had avoided buying an electric vehicle for fear that he wouldn’t be able to drive very far before having to plug in — a phenomenon known as range anxiety. But his sister, who moved to California from Texas and bought solar panels and a Tesla, persuaded their father, who lives with Dr. Hsiao, 54, to buy one, too. Following his family, Dr. Hsiao bought a Tesla and solar panels.

“Gas prices have just gone through the roof, and so, given that I’ve got the solar panels, it cost me next to nothing to charge,” he said. “For me, it was just a perfect fit.”

Elaine Borseth, a retired chiropractor, is another convert. Before she bought a Model S, she had never spent more than $20,000 on a car. But after seeing several of the big, sporty sedans on the road, she drove one about seven years ago. “I thought they were sleek and sexy,” said Ms. Borseth, who now runs the Electric Vehicle Association of San Diego.

“It’s almost one of those cases where the more you see, it just kind of breeds upon itself,” she said to explain why her neighborhood has so many electric cars.

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How Private Equity Firms Avoid Taxes

There were two weeks left in the Trump administration when the Treasury Department handed down a set of rules governing an obscure corner of the tax code.

Overseen by a senior Treasury official whose previous job involved helping the wealthy avoid taxes, the new regulations represented a major victory for private equity firms. They ensured that executives in the $4.5 trillion industry, whose leaders often measure their yearly pay in eight or nine figures, could avoid paying hundreds of millions in taxes.

The rules were approved on Jan. 5, the day before the riot at the U.S. Capitol. Hardly anyone noticed.

The Trump administration’s farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses: Private equity has conquered the American tax system.

one recent estimate, the United States loses $75 billion a year from investors in partnerships failing to report their income accurately — at least some of which would probably be recovered if the I.R.S. conducted more audits. That’s enough to roughly double annual federal spending on education.

It is also a dramatic understatement of the true cost. It doesn’t include the ever-changing array of maneuvers — often skating the edge of the law — that private equity firms have devised to help their managers avoid income taxes on the roughly $120 billion the industry pays its executives each year.

Private equity’s ability to vanquish the I.R.S., Treasury and Congress goes a long way toward explaining the deep inequities in the U.S. tax system. When it comes to bankrolling the federal government, the richest of America’s rich — many of them hailing from the private equity industry — play by an entirely different set of rules than everyone else.

The result is that men like Blackstone Group’s chief executive, Stephen A. Schwarzman, who earned more than $610 million last year, can pay federal taxes at rates similar to the average American.

Lawmakers have periodically tried to force private equity to pay more, and the Biden administration has proposed a series of reforms, including enlarging the I.R.S.’s enforcement budget and closing loopholes. The push for reform gained new momentum after ProPublica’s recent revelation that some of America’s richest men paid little or no federal taxes.

nearly $600 million in campaign contributions over the last decade, has repeatedly derailed past efforts to increase its tax burden.

Taylor Swift’s back music catalog.

The industry makes money in two main ways. Firms typically charge their investors a management fee of 2 percent of their assets. And they keep 20 percent of future profits that their investments generate.

That slice of future profits is known as “carried interest.” The term dates at least to the Renaissance. Italian ship captains were compensated in part with an interest in whatever profits were realized on the cargo they carried.

The I.R.S. has long allowed the industry to treat the money it makes from carried interests as capital gains, rather than as ordinary income.

article highlighting the inequity of the tax treatment. It prompted lawmakers from both parties to try to close the so-called carried interest loophole. The on-again, off-again campaign has continued ever since.

Whenever legislation gathers momentum, the private equity industry — joined by real estate, venture capital and other sectors that rely on partnerships — has pumped up campaign contributions and dispatched top executives to Capitol Hill. One bill after another has died, generally without a vote.

One day in 2011, Gregg Polsky, then a professor of tax law at the University of North Carolina, received an out-of-the-blue email. It was from a lawyer for a former private equity executive. The executive had filed a whistle-blower claim with the I.R.S. alleging that their old firm was using illegal tactics to avoid taxes.

The whistle-blower wanted Mr. Polsky’s advice.

Mr. Polsky had previously served as the I.R.S.’s “professor in residence,” and in that role he had developed an expertise in how private equity firms’ vast profits were taxed. Back in academia, he had published a research paper detailing a little-known but pervasive industry tax-dodging technique.

$89 billion in private equity assets — as being “abusive” and a “thinly disguised way of paying the management company its quarterly paycheck.”

Apollo said in a statement that the company stopped using fee waivers in 2012 and is “not aware of any I.R.S. inquiries involving the firm’s use of fee waivers.”

floated the idea of cracking down on carried interest.

Private equity firms mobilized. Blackstone’s lobbying spending increased by nearly a third that year, to $8.5 million. (Matt Anderson, a Blackstone spokesman, said the company’s senior executives “are among the largest individual taxpayers in the country.” He wouldn’t disclose Mr. Schwarzman’s tax rate but said the firm never used fee waivers.)

Lawmakers got cold feet. The initiative fizzled.

In 2015, the Obama administration took a more modest approach. The Treasury Department issued regulations that barred certain types of especially aggressive fee waivers.

But by spelling that out, the new rules codified the legitimacy of fee waivers in general, which until that point many experts had viewed as abusive on their face.

So did his predecessor in the Obama administration, Timothy F. Geithner.

Inside the I.R.S. — which lost about one-third of its agents and officers from 2008 to 2018 — many viewed private equity’s webs of interlocking partnerships as designed to befuddle auditors and dodge taxes.

One I.R.S. agent complained that “income is pushed down so many tiers, you are never able to find out where the real problems or duplication of deductions exist,” according to a U.S. Government Accountability Office investigation of partnerships in 2014. Another agent said the purpose of large partnerships seemed to be making “it difficult to identify income sources and tax shelters.”

The Times reviewed 10 years of annual reports filed by the five largest publicly traded private equity firms. They contained no trace of the firms ever having to pay the I.R.S. extra money, and they referred to only minor audits that they said were unlikely to affect their finances.

Current and former I.R.S. officials said in interviews that such audits generally involved issues like firms’ accounting for travel costs, rather than major reckonings over their taxable profits. The officials said they were unaware of any recent significant audits of private equity firms.

For a while, it looked as if there would be an exception to this general rule: the I.R.S.’s reviews of the fee waivers spurred by the whistle-blower claims. But it soon became clear that the effort lacked teeth.

Kat Gregor, a tax lawyer at the law firm Ropes & Gray, said the I.R.S. had challenged fee waivers used by four of her clients, whom she wouldn’t identify. The auditors struck her as untrained in the thicket of tax laws governing partnerships.

“It’s the equivalent of picking someone who was used to conducting an interview in English and tell them to go do it in Spanish,” Ms. Gregor said.

The audits of her clients wrapped up in late 2019. None owed any money.

As a presidential candidate, Mr. Trump vowed to “eliminate the carried interest deduction, well-known deduction, and other special-interest loopholes that have been so good for Wall Street investors, and for people like me, but unfair to American workers.”

wanted to close the loophole, congressional Republicans resisted. Instead, they embraced a much milder measure: requiring private equity officials to hold their investments for at least three years before reaping preferential tax treatment on their carried interests. Steven Mnuchin, the Treasury secretary, who had previously run an investment partnership, signed off.

McKinsey, typically holds investments for more than five years. The measure, part of a $1.5 trillion package of tax cuts, was projected to generate $1 billion in revenue over a decade.

credited Mr. Mnuchin, hailing him as “an all-star.”

Mr. Fleischer, who a decade earlier had raised alarms about carried interest, said the measure “was structured by industry to appear to do something while affecting as few as possible.”

Months later, Mr. Callas joined the law and lobbying firm Steptoe & Johnson. The private equity giant Carlyle is one of his biggest clients.

It took the Treasury Department more than two years to propose rules spelling out the fine print of the 2017 law. The Treasury’s suggested language was strict. One proposal would have empowered I.R.S. auditors to more closely examine internal transactions that private equity firms might use to get around the law’s three-year holding period.

The industry, so happy with the tepid 2017 law, was up in arms over the tough rules the Treasury’s staff was now proposing. In a letter in October 2020, the American Investment Council, led by Drew Maloney, a former aide to Mr. Mnuchin, noted how private equity had invested in hundreds of companies during the coronavirus pandemic and said the Treasury’s overzealous approach would harm the industry.

The rules were the responsibility of Treasury’s top tax official, David Kautter. He previously was the national tax director at EY, formerly Ernst & Young, when the firm was marketing illegal tax shelters that led to a federal criminal investigation and a $123 million settlement. (Mr. Kautter has denied being involved with selling the shelters but has expressed regret about not speaking up about them.)

On his watch at Treasury, the rules under development began getting softer, including when it came to the three-year holding period.

Monte Jackel, a former I.R.S. attorney who worked on the original version of the proposed regulations.

Mr. Mnuchin, back in the private sector, is starting an investment fund that could benefit from his department’s weaker rules.

Even during the pandemic, the charmed march of private equity continued.

The top five publicly traded firms reported net profits last year of $8.6 billion. They paid their executives $8.3 billion. In addition to Mr. Schwarzman’s $610 million, the co-founders of KKR each made about $90 million, and Apollo’s Leon Black received $211 million, according to Equilar, an executive compensation consulting firm.

now advising clients on techniques to circumvent the three-year holding period.

The most popular is known as a “carry waiver.” It enables private equity managers to hold their carried interests for less than three years without paying higher tax rates. The technique is complicated, but it involves temporarily moving money into other investment vehicles. That provides the industry with greater flexibility to buy and sell things whenever it wants, without triggering a higher tax rate.

Private equity firms don’t broadcast this. But there are clues. In a recent presentation to a Pennsylvania retirement system by Hellman & Friedman, the California private equity giant included a string of disclaimers in small font. The last one flagged the firm’s use of carry waivers.

The Biden administration is negotiating its tax overhaul agenda with Republicans, who have aired advertisements attacking the proposal to increase the I.R.S.’s budget. The White House is already backing down from some of its most ambitious proposals.

Even if the agency’s budget were significantly expanded, veterans of the I.R.S. doubt it would make much difference when it comes to scrutinizing complex partnerships.

“If the I.R.S. started staffing up now, it would take them at least a decade to catch up,” Mr. Jackel said. “They don’t have enough I.R.S. agents with enough knowledge to know what they are looking at. They are so grossly overmatched it’s not funny.”

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How Long Should It Take to Give Away Millions?

Ms. Madoff and others pushing for change see a growing gap between reputation-burnishing promises of money and distributions to people who need it. The Giving Pledge, which was started by Bill Gates, Melinda French Gates and their friend and collaborator Warren E. Buffett, gave billionaires a space where they could announce their intention to give away half their fortunes or more, often to great acclaim. But it provides no mechanism to monitor or ensure the giving actually happens.

Earlier this year, the Chronicle of Philanthropy ranked Jeffrey P. Bezos, the founder of Amazon, as the top philanthropist of 2020 because he committed $10 billion to his Bezos Earth Fund to fight climate change. But he had handed out less than one-tenth of that, $791 million, to working nonprofits like the Environmental Defense Fund and Natural Resources Defense Council.

Charitable giving has remained relatively steady for decades, clocking in at roughly 2 percent of disposable income per year, give or take a few tenths of a percent. In 1991, the year that Fidelity began to offer donor-advised funds, just 5 percent of giving went to foundations and DAFs. By 2019, the most recent year available, that figure had risen to 28 percent.

It was January 2020 when that small group gathered at the offices of the nonprofit consulting firm the Bridgespan Group in Manhattan for a wonky brainstorming session about the state of philanthropy. The group included foundation leaders, former congressional staff members, former senior Internal Revenue Service officials and a key constituency in any effort to change how billionaires give away their money: billionaires.

One of the organizers was John D. Arnold. Once a trader at Enron, the Houston energy company that infamously collapsed in 2001, Mr. Arnold later ran his own hedge fund, which made him one of the youngest billionaires in the United States.

Ms. Madoff, another leader of the initiative, has written a book, “Immortality and the Law,” about the growing legal power of dead people in America and has applied her knowledge of estate taxes and inheritance law to the rising field of philanthropy.

The group focused on the fact that most of the laws governing philanthropy were half a century old, dating back to 1969.

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How the Pandemic Has Changed Attitudes Toward Wealth

Several key metrics of defining wealth had fallen in the past three years. In 2018, 65 percent of respondents felt that wealth gave them peace of mind, but that number had fallen to 53 percent by this spring. Half of the respondents equated wealth with happiness, four percentage points lower than in 2018.

In another shift, more people said wealth meant success in life — that was up to 50 percent, from 40 percent last time.

“A big component of success is still making money, but it’s just not making money to increase your financial capital,” Mr. Baker said. “It’s accomplishing something in the process, to build other things, to take some of that financial capital and put it into something else.”

Mr. Norton said his priorities had shifted to focusing more on the people around him, so he decided to pay the first half of his company’s Christmas bonus to employees in May. “I did it just to make sure they were OK,” he said. “I focused less on my net worth and income and more on making sure we’re doing the right thing for our clients but also making sure my staff and my family was OK.”

For others, though, the mandated isolation focused their mind. Douglas Swets, an angel investor in early-stage start-ups, said the pandemic brought greater clarity and focus to the investments he and his partners were making.

“After a year of Zoom meetings, I can have a lot more meetings and it’s improved our due diligence,” he said. “We can have more people doing reference calls. You get all the questions answered.”

At the same time, Mr. Swets, who is married with two adult children, said the investments that he reviewed were not necessarily better given the extra time. If anything, they were actually riskier, but the pandemic gave him a different view on investing.

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The Mogul in Search of a Kinder, Gentler Capitalism

A self-made multimillionaire who married into a revered European banking dynasty, Lynn Forester de Rothschild now spends her time calling for higher taxes on the wealthy, stricter regulation of big business and a wholesale reordering of the capitalist system that has delivered her such privilege.

It is an unlikely reformation for a woman who came from modest origins, made a fortune in the 1980s and could have spent her later years enjoying a sumptuous life of aristocracy.

Born to a middle-class family in the New Jersey suburbs, Ms. Rothschild began her career at the white shoe law firm Simpson, Thacher and Bartlett, then started working with John Kluge, a telecommunications mogul, in the 1980s. Ms. Rothschild eventually struck out on her own, working for, running and founding a series of successful media companies.

In 2000, she married Sir Evelyn de Rothschild, a British financier. (Henry Kissinger introduced them at the Bilderberg conference; the Clintons invited them to honeymoon at the White House.)

Despite her pedigree, Ms. Rothschild has in recent years come to understand that while she and her associates have enjoyed the fruits of capitalism, not all have fared so well. Many workers are struggling to get by. The environment is in serious trouble. Government often cleans up the private sector’s messes.

Sociable and well-connected, Ms. Rothschild has tapped her expansive network to launch a multipronged assault on the status quo. In 2014, she founded the Coalition for Inclusive Capitalism, an effort to get business leaders more engaged in environmental and social issues. And she has parlayed that into a related group, the Council for Inclusive Capitalism, that is working with Pope Francis, and a new fund focused on socially responsible investing she founded with Jeff Ubben, a successful hedge fund manager.

This interview was condensed and edited for clarity.


Back when you were starting out in your career, were you concerned about some of the negative impacts of capitalism in the same way you are today?

It was really different. I don’t think we realized how bad it was. Graduating from law school in 1980, I believed I was living the American dream. I was a skinny girl from nowhere who knew no one, who had aspirations for an interesting life that would make a difference. And I believed that was available to me if I worked hard and played by the rules. The mantra at that time, that was not said disparagingly, was “Greed is good.” There was an Ayn Rand view that if you pursue your interests, all of society is lifted. So I really did believe that all I needed to do was to pursue my career in a legal, ethical, exciting way, and I didn’t have to worry about society.

When did it click for you that something wasn’t working?

We didn’t anticipate the kind of disparity that developed over those 20 years when we started in 1980. And I don’t think people practicing shareholder primacy were evil. There was just too much greed. But by 2008 it was impossible to ignore. The concentration of wealth in America at that time already was back to levels we had during the Gilded Age. In the 1960s the ratio of C.E.O. pay to average worker pay was 25 to one. Today it is 320 to one.

That has very conveniently created enormous personal wealth, which became the objective, as opposed to: What wealth have you left behind in society? How have you made the world better for your children, for your community? “Greed is good” was never a concept for Adam Smith.

What do you see as the most problematic symptoms of our economic system today?

Inequality of opportunity. We have to be honest that in each of our two recent crises — the great financial crisis and the Covid crisis — the government came to the aid of the wealthiest. Some have called it “socialism for the rich and capitalism for everyone else.” There’s something to that.

The elites turn to government when the financial system is blown up or we have a health crisis. Government got us out of both of those problems, and it got us out with too much of the benefit going to the richest. So how do we equalize that?

I personally am fine with higher taxes, if higher taxes lead to better distribution of opportunity, particularly for people of color and people in the lower part of the socioeconomic environment. I also believe that it is time that we listen more to our employees. It’s time that we create a more level playing field with respect to worker voice and worker involvement. This is hard stuff, because it can impact profit.

A year ago you said Covid was going to change capitalism forever. In what way did you think it was going to change capitalism, and how do you think that all has actually played out?

I’m probably always guilty of being overly optimistic. I believed that our moral compass would tell us that we need to take better care of the people who take care of us. But we saw starkly how we treated the people we called essential, how we were exposing them to this deadly disease. I personally find it difficult to understand why that is so hard for us as a society, and that’s why I founded the Council for Inclusive Capitalism.

I had the disease. I was really sick. I thought I was going to die. I had a really bad case and I’m scared to death of it.

What were the origins of the Council for Inclusive Capitalism?

In June of 2015, Laudato Si was written by Pope Francis. By September, the Sustainable Development Goals were agreed to by the United Nations. By December, the Paris climate accord had been signed. You had every reason to believe that there was a sense of the common good.

And if you go back and read Laudato Si, Pope Francis writes: “The lessons of the global financial crisis have not been assimilated, and we are learning all too slowly the lessons of environmental deterioration.” He goes on to say that “by itself the market cannot guarantee integral human development and social inclusion.”

What are some of the reforms you’d like to see? The Business Roundtable can put out as many press releases as it wants about stakeholder capitalism, but we still have companies losing billions of dollars, laying off tens of thousands of workers and still rewarding their C.E.O.s with tens of millions of dollars.

Something is really broken. I do believe that C.E.O.s and boards are willing to share the wealth and do more. But the Chamber of Commerce and the Business Roundtable are going to go for tax policy and trade policy as their primary objective.

I remember a person who was very senior in a previous administration told me that in his four years in office, only one C.E.O. asked to go and see him about an issue of the common good. Everyone was coming in to push what they needed for their own book. We need to profitably solve the problems of people and planet. That’s why business exists.

Who’s to say that there shouldn’t be a government policy that prices the negative externalities that companies cost the taxpayer when full-time workers have to be on public assistance to lead a decent life? Why can’t there be a tax and a penalty on that? Why is Jeff Bezos the richest man in the world? He’s a nice guy, and at the same time he has tens of thousands of employees on public assistance. Why is that OK? Why do we have a government that lets that happen?

Which do you think is more broken, American politics or capitalism?

I think their problems feed upon each other. They’re creating a death spiral together and it’s got to be stopped. Politics and capitalism needs to return to a basic sense of decency.

And that is actually why I reached out to the Holy Father, because I think that a lot of what it will take to change behavior is a moral and ethical reawakening. It’s not just one policy, it’s not just taxes, it’s not just reforming labor laws — all of which are important, and we need competent ethical people to do it. But at the core of it, it has to come from common decency.

God did not invent the corporation. Society allows a corporation to exist, gives shareholders limited liability, and expects something in return. But we don’t just expect cheap widgets.

How do you reconcile your critique of shareholder capitalism with the fact that you’re now working with a hedge fund manager?

If there is going to be a system change, the capital markets need to reward shareholders. That is only going to happen if there are really talented investors who find the new levers of value creation, and are engaging actively with companies that are transforming at scale to become cleaner and more inclusive, and those companies become the ones that are the most valuable. Then we’ve created a race to the top.

That’s why I’m in partnership with Jeff, who’s such a legend in shareholder value creation and transforming companies. I have 1,000 percent confidence in the integrity of Jeff, even though he’s been on the opposite side for many years. I trust many billionaires.

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The Gateses’ Public Split Spotlights a Secretive Fortune

The fortune of Bill Gates and Melinda French Gates exceeds the size of Morocco’s annual economy, combines the value of Ford, Twitter and Marriott International and is triple the endowment of Harvard. While few know how their wealth will be divided in the divorce, one thing is clear: breaking it up can’t be easy.

Mr. Gates built one of the great fortunes in human history when he founded Microsoft in 1975 with Paul Allen. The Gateses’ net worth is estimated to be more than $124 billion, and includes assets as varied as trophy real estate, public company stocks and rare artifacts.

There’s a big stake in the luxury Four Seasons hotel chain. There are hundreds of thousands of acres of farmland and ranch land, including Buffalo Bill’s historic Wyoming ranch. There are billions of dollars’ worth of shares in companies like AutoNation and Waste Management. There’s a beachfront mansion in Southern California. And one of Leonardo da Vinci’s notebooks.

“The amount of money and the diversity of assets that are involved in this divorce boggles the imagination,” said David Aronson, a lawyer who has represented wealthy clients in divorce cases. “There have rarely been cases that are even close to this in size.”

2019 divorce between the Amazon founder Jeff Bezos and his now ex-wife, the novelist and philanthropist MacKenzie Scott, was bigger. Mr. Bezos had an estimated fortune of $137 billion, though mostly in Amazon stock, and Ms. Scott kept 4 percent of Amazon’s shares, worth $36 billion at the time.

But Mr. Gates has for decades been diversifying his holdings; he owns just 1.3 percent of Microsoft. Instead, his stock portfolio includes stakes in dozens of publicly traded companies. He is the largest private owner of farmland in the country, according to The Land Report. In addition to the Four Seasons, he has stakes in other luxury hotels and a company that caters to private jet owners. His real estate portfolio includes one of the largest houses in the country and several equestrian facilities. He owns stakes in a clean energy investment fund and a nuclear energy start-up.

Forbes, or $146 billion, according to the research firm Wealth-X. Including the Gates Foundation’s endowment and the Gates personal fortune, Cascade most likely oversees assets that put it on par or beyond some of the world’s biggest hedge funds in size.

Mr. Larson operates Cascade with an obsessive level of secrecy, going to great lengths to cloak the firm’s transactions so that they can’t easily be traced back to the Gateses. In a 1999 interview with Fortune magazine, Mr. Larson said he chose the name “Cascade” because it was a generic-sounding name in the Pacific Northwest.

that questions about the future of the Gates Foundation immediately arose following news of the divorce. The foundation directs billions to 135 countries to help fight poverty and disease. As of 2019, it had given away nearly $55 billion. (In 2006, Mr. Buffett pledged $31 billion of his fortune to the Gates Foundation, greatly increasing its grant making.)

Since he stepped down from day-to-day operations at Microsoft in 2008, Mr. Gates has devoted much of his time to the foundation. He also runs Gates Ventures, a firm that invests in companies working on climate change and other issues. Over the decades, Mr. Gates shed the image of a ruthless tech executive battling the United States government on antitrust to be viewed as a global do-gooder. And he appears to be keenly aware of the stark contrast between the scale of his wealth and his role as a philanthropist. “I’ve been disproportionately rewarded for the work I’ve done — while many others who work just as hard struggle to get by,” he acknowledged in a year-end blog post from 2019.

told The New York Times last year. “There’s just none.”

Matthew Goldstein contributed reporting.

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Why a $10,000 Tax Deduction Could Hold Up Trillions in Stimulus Funds

“I think it’s a giveaway to the rich,” she told reporters last month. “So, I do not believe in holding the entire infrastructure package hostage for a full repeal and abolishing the cap. I think we can have a conversation about the policy, but it’s a bit of an extreme position, to be frank.”

There’s no debate that the SALT deduction goes mostly to wealthier taxpayers. About 85 percent of its benefits accrue to the richest 5 percent of households, according to an analysis by the Institute on Taxation and Economic Policy in Washington. Were the cap to be repealed, about two-thirds of the benefits — about $67 billion — would go to families making over $200,000 a year.

Exactly how that is distributed is subject to an overlapping crosscurrent of tax policies whose effects vary from place to place. Since the 2017 tax cut broadly lowered taxes, even for residents of high-tax states, the $10,000 cap meant that affluent people in blue states ended up with smaller tax cuts than those in lower-cost red states.

But the political bottom line is that capping a very visible benefit angered the sorts of voters on whom high-tax states rely — families in a place like Long Island or Orange County, Calif., who might make a six-figure income, own a home and pay tens of thousands a year in state income and local property taxes. In the psychology of paying taxes, a slightly smaller savings might seem worse than no savings at all, particularly if you feel singled out, as blue state taxpayers clearly were.

Giveaway or not, there is political logic in trying to restore the unlimited benefit. Affluent suburban voters helped Mr. Biden win the White House, and there is even some evidence to suggest that anger over the lost deduction helped Democrats flip a handful of Republican seats during the 2018 election.

Though the debate affects Democratic districts disproportionately, SALT is less about rote partisanship than about representing voters from wealthy areas with high housing costs. The handful of Republicans who voted against the 2017 tax cuts mostly did so because of the loss of tax breaks like SALT, and today Representative Young Kim, a California Republican from Orange County, supports a repeal of the cap.

There’s also little doubt that the cap falls much harder on blue states. Before the 2017 tax cuts, the average SALT deduction in New York was $22,169 — twice the national average of $10,233 — according to data compiled by the Government Finance Officers Association. It was $19,664 in Connecticut, $18,437 in California and $17,850 in New Jersey.

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It’s Not Just the Really Wealthy Who Face Tax Increases

Mr. Biden has cleared up some issues for the middle class in his proposal. He has recommended an exemption of $1 million on the capital gains of assets transferred to heirs. He has also left in place the $250,000 exemption on taxable gains in the value of a person’s primary residence. (These exemptions would double for a couple.)

But in many cases, this would affect people who would not have had to think about paying any tax at death, whether the estate tax exemption remained the current $11.7 million or dropped to $3.5 million, which had been expected to happen.

“The changes to the step-up in basis — that’s the curveball,” said Paul Saganey, the founder and president of Integrated Partners, a financial advisory firm. “It’s really going to surprise people. People don’t know what it is or what it means, so how can they quantify the impact of it?”

Also missing was any mention of reinstating the full deduction for state and local taxes, known as SALT. The cap on these deductions in the 2017 tax law hurt people living in the Northeast and West Coast states, where the property and state taxes are higher.

Mr. Biden has proposed limiting a break on real estate transactions. He would cap at $500,000 the value of 1031(b) exchanges, which have essentially allowed real estate investors to roll gains from the sale of buildings into new buildings without ever paying capital gains taxes on them. Coupled with the step-up in basis at death, which wiped out all the gains in value of the buildings, this was a large tax break for families whose wealth rested on real estate investment and ownership.

What is less known is what, if anything, may be adopted from the “For the 99.5 percent” plan. The plan would close some popular tax-reduction strategies, many of which were targeted during the Obama administration.

Three of the proposals would be relatively easy to enact. One would end short-term trusts that allow people to pass tax-free to their heirs expected appreciation — say from the sale of a private business. Another would limit tax-free gifts that can be given each year to trusts to fund things like life insurance to pay estate taxes. A third would curtail special tax treatment that family partnerships receive, even when they own liquid securities and not an operating business.

“They already have the regulations written of these,” Ms. Lucina said. “I don’t want to scare anyone that these will be enacted. But some of these could be enacted quickly and looked at as loophole closers.”

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Biden’s Tax Proposals Are Not Just for the Really Wealthy

Mr. Biden has cleared up some issues for the middle class in his proposal. He has recommended an exemption of $1 million on the capital gains of assets transferred to heirs. He has also left in place the $250,000 exemption on taxable gains in the value of a person’s primary residence. (These exemptions would double for a couple.)

But in many cases, this would affect people who would not have had to think about paying any tax at death, whether the estate tax exemption remained the current $11.7 million or dropped to $3.5 million, which had been expected to happen.

“The changes to the step-up in basis — that’s the curveball,” said Paul Saganey, the founder and president of Integrated Partners, a financial advisory firm. “It’s really going to surprise people. People don’t know what it is or what it means, so how can they quantify the impact of it?”

Also missing was any mention of reinstating the full deduction for state and local taxes, known as SALT. The cap on these deductions in the 2017 tax law hurt people living in the Northeast and West Coast states, where the property and state taxes are higher.

Mr. Biden has proposed limiting a break on real estate transactions. He would cap at $500,000 the value of 1031(b) exchanges, which have essentially allowed real estate investors to roll gains from the sale of buildings into new buildings without ever paying capital gains taxes on them. Coupled with the step-up in basis at death, which wiped out all the gains in value of the buildings, this was a large tax break for families whose wealth rested on real estate investment and ownership.

What is less known is what, if anything, may be adopted from the “For the 99.5 percent” plan. The plan would close some popular tax-reduction strategies, many of which were targeted during the Obama administration.

Three of the proposals would be relatively easy to enact. One would end short-term trusts that allow people to pass tax-free to their heirs expected appreciation — say from the sale of a private business. Another would limit tax-free gifts that can be given each year to trusts to fund things like life insurance to pay estate taxes. A third would curtail special tax treatment that family partnerships receive, even when they own liquid securities and not an operating business.

“They already have the regulations written of these,” Ms. Lucina said. “I don’t want to scare anyone that these will be enacted. But some of these could be enacted quickly and looked at as loophole closers.”

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