House Speaker Nancy Pelosi (D-Calif.) is pushing an 1,800-page Coronavirus package filled with unrelated, liberal priorities. The bill, known as the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES), proposes spending nearly $1 trillion to bailout mismanaged state and local governments, contains a $25 billion bailout for the postal service, and extends an unemployment program for more 6 months that will endanger the economic recovery by subsidizing welfare over work.
As part of this proposal, Pelosi also proposes a suspension of the $10,000 cap on state and local tax deductions a policy that will subsidize high-tax states, does nothing to help the middle class, and rolls back the Trump tax cuts.
In 2017, the Tax Cuts and Jobs Act (TCJA) imposed a $10,000 limitation on state and local tax deductions, more commonly referred to as the SALT cap.
The cap was imposed to broaden the tax base within legislation that reduced taxes for Americans at every income level. For instance, 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. 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.
Rather than building on the TCJA and offering further tax reduction for American families, Pelosi is pushing a policy that overwhelmingly benefit wealthy, blue states.
According to an analysis by the Joint Commission on Taxation (JCT), 94 percent of the benefits from repealing the SALT cap would go to taxpayers making more than $200,000 a year.
Rolling back the SALT cap would do nothing to help fight the Coronavirus, nor would they do anything to help the middle class. Rather than enacting Pelosi’s blue state giveaways, lawmakers should make the tax code fairer by repealing the SALT cap in exchange for further lowering tax cuts
Even some Democrats agree that removing the SALT cap is a terrible idea that would do nothing to help 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.” Lawmakers should repeal the SALT deduction entirely as part of legislation that offers broad based tax reduction for American families.
While Pelosi claims that her legislation is helping the middle class, this is empty rhetoric, as noted by Senate Majority Leader Mitch McConnell (R-KY):
“It’s bad enough that my Democratic colleagues want to unwind tax reform, but it’s downright comical that their top priority … is helping wealthy people in blue states find loopholes to pay even less”.
While Democrats are pushing long-held liberal priorities, Republicans have called for proposals that are targeted to the middle class and Main Street businesses. President Trump has called for tax cuts for businesses and individuals in order to give workers more take-home pay and give businesses the liquidity they need to survive the pandemic.
Republicans have also pushed the Paycheck Protection Program (PPP) to provide loans and grants to small businesses so they can continue paying their workers. In contrast, Pelosi and Democrats have played politics with this program and refused to hold a vote on providing additional funding to the PPP for weeks.
Pelosi’s proposal to repeal the SALT Cap is a clear example of using the crisis to push unrelated policy priorities. This proposal will do nothing to help Americans survive the Coronavirus pandemic and would overwhelmingly benefit wealthy blue states. It is uniquely unsuited to any pandemic-related legislation and should be rejected by Congress.