The House of Representatives is set to vote on H.R. 5377, the “Restoring Tax Fairness for States and Localities Act.”
ATR urges a “NO” vote.
This legislation is a violation of the Taxpayer Protection Pledge, a commitment made by 218 members in the House and Senate to oppose any and all net tax increases.
If passed into law, it will raise taxes on individuals and small businesses that file through the individual income tax system. This bill trades a temporary rollback of the SALT cap for a permanent rate hike.
This legislation is a net tax increase of $2.4 billion over the ten-year budget window, according to the Congressional Budget Office.
H.R. 5377 also rolls back the Tax Cuts and Jobs Act, passed by Republicans and signed into law by President Trump.
“The Trump tax cuts reduced taxes across the board. This legislation is step one toward abolishing the entire Trump tax cuts and increasing taxes on the middle class, a key goal of every Democrat presidential candidate,” said Grover Norquist, President of Americans for Tax Reform.
The legislation raises the cap on the state and local tax deduction from $10,000 to $20,000 for 2019 and removes the cap entirely for 2020 and 2021.
The legislation also raises the top rate from 37% to 39.6% and lowers the threshold that this top rate kicks in for all filing statuses.
Under current law, the 37 percent bracket kicks in for a single filer at $518,400 in income. Under the legislation, the new top rate is increased to 39.6 percent and the threshold is lowered to $441,475 of income.
Similarly, a family taking the married filing jointly status currently hits the 37 percent bracket at $622,050 in income. Under the legislation, this family will hit the 39.6 bracket at $496,000 in income.
Repealing or rolling back the SALT cap is regressive.
- 94 percent of the benefits from repealing the SALT cap would go to taxpayers making more than $200,000 a year.
- The left leaning Center for Budget and Policy Priorities has stated that this proposal would be “regressive and costly.”
- The Center for American Progress has stated that repeal of the SALT cap “should not be a top priority” as it would “overwhelmingly benefit the wealthy, not the middle class.”
- Senator Michael Bennet (D-CO) recently criticized efforts to repeal the SALT cap noting that it runs counter to Democrat ideals: “We can say we’re for a progressive tax bill and for fighting inequality, or we can support the SALT deduction, but it’s really hard to do both of those things.”
Repealing or rolling back the SALT cap is also unnecessary.
While Democrats claim the SALT cap raised taxes, this is overstated and misleading.
The TCJA reduced taxes for roughly 90 percent of Americans and for taxpayers at every income level through lower rates, the expanded standard deduction, and the doubling of the child tax credit.
Furthermore, repeal of the Alternative Minimum Tax meant that 4.5 million families were able to claim $10,000 in SALT deductions, as the AMT disallowed this deduction.
The SALT deduction subsidizes high tax, big government states. This deduction is rarely used by middle class families as they take the standard deduction instead of itemizing. Capping this deduction has meant that the federal government is no longer providing a benefit to upper income earners in blue states.
ATR urges a NO vote on this regressive legislation that violates the Taxpayer Protection Pledge.