POLITICO (“Trump tells House Republicans to find a ‘fair number’ on SALT“):
New York Republicans came out of a Mar-a-Lago meeting with Donald Trump on Saturday confident that the incoming president is on board with increasing a key deduction for state and local taxes. And they have marching orders from Trump: Go back to Congress and negotiate a “fair number.”
“The president certainly wants to increase the deduction for SALT to provide more relief, because he knows that our mayors and governors are crushing taxpayers,” said Rep. Nicole Malliotakis (R-N.Y.) in an interview after the meeting. “He wants us to work on what would be a fair number.”
The deduction, known as SALT, has been a constant headache for lawmakers of both parties who represent states with high property taxes, such as New York, California and New Jersey. Republicans’ 2017 tax law put a $10,000 cap on the deduction, amounting to a tax increase for many voters, and both Democratic and GOP members from those states have been pushing for a fix ever since. While the lawmakers didn’t come to an agreement on specific policy proposal that would go in a huge, party-line bill that would tackle taxes, energy and the border, momentum towards consensus on the SALT deduction is a big step forward for Republicans on passing their party’s priorities.
Yet the push still must navigate complex politics, simply because many GOP members from low-tax red states detest the deduction as they look to cut spending. There’s also fractious politics within the SALT caucus itself, which has had difficulties in the past agreeing on the appropriate “ask.” Privately, House GOP leaders have told some Republicans that without a way forward on SALT, they can’t properly plan for just how big the final package will be and how much they’ll need to cut spending to pay for it.
This has been a really odd issue. The cap on SALT taxes back in 2017 seemed to come out of nowhere, as it wasn’t an issue that was emphasized—or, so far as I recall, even mentioned—in the 2016 campaign. By every indication, it was mostly a Screw You to the blue states, which tend to have higher tax rates, bolstered by the traditional Republican fiscal austerity urge.
There have been many efforts since, notably led by Speaker Emeritus Nancy Pelosi, since to roll back the cap. But it has run into the rather sticky problem that doing so amounts to a tax cut to the wealthiest Americans, which Democrats ostensibly oppose. (Ironically, that Republicans are supposed to oppose tax hikes with every fiber of their being did not seem to factor in.)
While I would benefit considerably from removing the cap, I really can’t defend it from a public policy standpoint.
Effectively, it amounts to transferring my tax bill to people less well off economically than me. Or, more realistically, adding it to the national debt, the interest payments on which are strangling the economy. The closest I can come to a good argument is “I shouldn’t be taxed twice on the same income.” But all taxes would fit into that bucket.
A better argument existed for phase-ins, in that it’s simply unfair to make what amounts to a radical change to tax code that negatively impacts decisions that were made factoring in existing tax policies. I don’t know that we’d have made considerably different choices in buying our current house, in that we needed the ability to house a large family, but we did certainly expect to be able to write off our property taxes.
