SALT Dogs

Democrats should ditch tax laws that favor the wealthy.
Senate Majority Leader Chuck Schumer speaks during a news conference at the U.S. Capitol in Washington D.C., January 26, 2021 (CNS photo/Al Drago, Reuters).

Prior to passage of Donald Trump’s 2017 tax package, there was no limit on the amount of state and local taxes Americans could deduct from their federal returns. For people in high-tax states like New York, New Jersey, and California—especially well-off homeowners whose property taxes alone can run into the tens of thousands of dollars—this was a pretty sweet deal, since the write-off could significantly reduce the amount of federal taxes they owed. But there was never any denying that the so-called SALT benefit disproportionately benefited people of means. According to the Brookings Institution, it helped the richest Americans save thousands of dollars in annual federal taxes, while gifting the typical “middle-class” homeowner a reduction of just $27. In 2017, taxpayers making more than $200,000 received 70 percent of SALT benefits, while the top 1 percent of earners got more than half.

This is one of the reasons why some tax experts advocated revising or even eliminating the SALT provision. That most of its beneficiaries resided in coastal states that went for Hillary Clinton in 2016 was excuse enough for Trump—bent on petty revenge—to target it in his tax bill. Congressional Republicans, meanwhile, needed something they could point to as offsetting the plan’s massive giveaways to corporations and the wealthy, never mind the mathematical impossibility of that. And so the SALT benefit was capped at $10,000, one unobjectionable provision—notwithstanding the vindictiveness and cynicism that fostered it—in an otherwise unabashedly pro-rich piece of legislation.

What the SALT Caucus lacks is a defensible argument.

But ever since, elected officials from the states most affected by the cap have been agitating for it to be eliminated. In 2018, New York, New Jersey, Connecticut, and Maryland unsuccessfully sued the federal government, calling the cap an “unconstitutional assault” on their sovereignty. Last summer, New York Sen. Charles Schumer promised that if he became majority leader, the cap “will be dead, gone, and buried.” Most recently, Democratic New York Rep. Tom Suozzi—who has disingenuously called the cap a “body blow...to middle-class families throughout the country” and an “injustice” in urgent need of fixing—helped form the SALT Caucus, a bipartisan group of about thirty lawmakers set on reinstating the unlimited deduction. They’ve made repeal of the cap a condition of their support for President Biden’s American Jobs Plan, otherwise known as the infrastructure bill. “No SALT, no deal,” Suozzi has declared on behalf of his fellow caucus members, the majority of them blue-state Democrats. Biden, who expressed support for repeal while on the campaign trail last year, has lately seemed cooler to the possibility. But with the Democrats’ House majority so slender, the SALT Caucus may have just enough sway to create headaches for the president.

What the caucus lacks is a defensible argument. Democrats who on the one hand clamor for higher taxes on the wealthy can’t on the other demand reinstatement of what Rep. Alexandria Ocasio-Cortez rightly describes as a “giveaway to the rich.” She is one New York congressional Democrat who opposes repeal of the cap, and she is challenging caucus members to rethink the SALT deduction rather than use it as a way to hold “the entire infrastructure package hostage.” This isn’t just an appeal for political common sense but an invitation to formulate tax policy that is truly progressive. Why not maintain the cap or lower it further? For that matter, why not eliminate the SALT deduction altogether? A needless subsidy for the well-off only exacerbates the economic inequalities Democrats spent the Trump years decrying. Such full-throated support for its preservation raises legitimate questions about the authenticity of that concern. 

Published in the June 2021 issue: 

Dominic Preziosi is Commonweal’s editor. Follow him on Twitter.

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