Democratic Lawmakers Threaten Spending Bill Over SALT Cap Repeal

Image by Steve Buissinne from Pixabay

Tax that man behind the tree. As Congress works to pass a $3.5 trillion budget reconciliation package a group of “moderate” Democrats are threatening to block the spending bill unless the State and Local Tax (SALT) caps are repealed. Prior to Donald Trump’s 2017 tax law, state and local taxes were fully deductible on federal income tax returns (for itemized filers). The 2017 tax law, passed at the urging of Donald Trump, limited the SALT deduction to $10,000. This cap has long rankled Democrats elected to office in high-tax, high-spending locales such as the New York metropolitan area and San Francisco. Closer to home the cap also impacts people living in Virginia’s high-cost, high-tax areas like Northern Virginia.

Tax breaks for the rich. Many Democrats from high-tax jurisdictions have opposed the SALT caps since they were first conceived. Cherry picking data and distorting the facts has been used in an effort to claim that the SALT caps create serious harm for the middle class. Back in 2017 Speaker Nancy Pelosi tweeted, “This is striking: 50% of households that claim State & Local Tax deduction make under $100K – & now @SpeakerRyan wants to throw it away.” That statement earned Pelosi two Pinocchios from The Washington Post. The benefits of lifting the SALT cap would accrue 30% to the top 1% of household income earners, 49% to the top 5% and 80% to the top 20%.

Taking a new tact. The latest attempt to repeal the SALT cap is aimed more at social programs than the hallucination that the caps hurt the middle class. One advocate for a full repeal of the SALT cap is Rep. Thomas Suozzi who represents the northern shore of Long Island and sections of Queens.

“We need to have this state and local tax deduction. We built a whole system around it,” New York’s Suozzi, a main proponent of the cap repeal, said Tuesday. “People are leaving our states. And when they leave, it leaves behind a hole in our revenues.”

From that fairly honest point Suozzi veers into distortion.

“We’re in a competition with states that do not insure their children, do not pay their teachers, do not have mass transit and think that climate change is a hoax, and as a result, their costs are cheaper.”

It would be interesting to ask Rep. Suozzi for a list of the states that don’t pay their teachers. Or, for ideas as to where Wyoming would put mass transit.

The fact that the voters in New York elect tax-and-spend politicians like Suozzi hardly justifies the good people of Arkansas subsidizing the New Yorkers’ choices.

Back in the Old Dominion. The SALT cap should remain on the books. Mismanaged, high cost, high-tax areas like Northern Virginia don’t happen by accident. County Boards of Supervisors are into developers’ pockets for donations, etc. In return, bad zoning decisions pad the developers’ pockets while holding down the supply of affordable housing which keeps home prices and real estate taxes high. The unslakable thirst for NoVa money to be spent elsewhere in the state has our state legislature forever on the prowl for ways to raise taxes (and tolls) in NoVa but nowhere else. Meanwhile, the overpaid and under-loved residents of NoVa seem determined to elect politicians whom they know will raise state and local taxes.

Why should the rest of the country subsidize the incompetence of the electorate and political class in places like San Francisco, Boston, New York, New Jersey and Northern Virginia?

— by Don Rippert