group of New Jersey and New York Members of Congress are again trying to rollback the cap on state and local tax deductions as part of President Joe Biden’s Coronavirus relief proposal. This proposal has nothing to do with the pandemic, will subsidize high-tax blue states, and will do little or nothing to help the middle class.  

The Tax Cuts and Jobs Act (TCJA) passed in 2017 imposed a $10,000 limitation on state and local tax deductions (SALT). This provision was one of several base broadeners that helped facilitate tax reductions for middle class American families.

The hypocrisy of Democrats is clear. On one hand, they are falsely arguing that repealing the SALT cap helps the middle class. On the other hand, they are calling for repeal of the TCJA, arguing it did nothing to help American families.

The fact is, SALT almost exclusively benefits wealthy blue states – 94 percent of the benefits from repealing the SALT cap would go to taxpayers making more than $200,000 a year. While some Democrats, such as Congressman Tom Suozzi (D-N.Y.), claim that the SALT deduction cap amounts to “double taxation,” they ignore the fact that the underlying problem is that New York and other states impose excessively high state and local taxes. In addition, most Americans never had a chance to mitigate this supposed double taxation because they do not claim the state and local tax deduction and instead take the standard deduction. 

While SALT does little for middle income Americans, the TCJA – the tax cut that Dems repeatedly promise to repeal – significantly reduced taxes for families across the country.

Prior the TCJA, taxpayers could deduct an unlimited amount of state and local taxes from their federal tax returns. This created a two-tiered system that overwhelmingly benefited high-tax blue states. Many Americans claimed $0 in state and local taxes because they took the standard deduction instead. The law cut tax rates, doubled the standard deduction, and doubled of the child tax credit. Thanks to these provisions, a typical family of four with median annual income of $73,000 has seen a tax cut of more than $2,058, a roughly 60 percent reduction in federal income taxes. 

Furthermore, IRS data compiled by Americans for Tax Reform shows that middle income American families saw the biggest tax cut – measured as the percentage decrease in “total tax liability” between 2017 and 2018 – from the Trump-Republican TCJA. Americans with adjusted gross income (AGI) of $50,000 to $74,999 saw a 13.2 percent reduction in average tax liabilities between 2017 and 2018. While Americans with AGI of $1 million or above saw a 5.8 percent reduction in average federal tax liability between 2017 and 2018. This is less than half the tax cut seen by Americans with AGI between $50,000 and $100,000.  

It is completely unclear whether we even need another COVID relief bill at this time. The US has already spent nearly $5 trillion in COVID relief packages, including $900 billion one month ago.

However, if another package is deemed necessary, repeal of the SALT cap should not be included. Rolling back the SALT cap does nothing to help fight the Coronavirus, nor would it do anything to help the middle class.  

The proposal to repeal the SALT cap is a clear example of using the pandemic to push unrelated policy priorities. If Democrats actually want to help the middle class, they should focus their efforts on extending the TCJA, not fighting solely for their wealthy constituents.