May 19,2020

ICYMI: House Democrats' misguided push to cut taxes for the rich

Shay Hawkins
May 18, 2020
As his committee began drafting the 2017 Tax Cuts and Jobs Act, Senate Finance Committee Chairman Orrin Hatch had three central goals: to make the tax code fairer, simpler, and less burdensome at every level of income. 
One of the strongest provisions of the act in terms of fairness was the $10,000 cap it placed on the federal deduction that taxpayers can take for the state and local taxes they pay. Given Democratic rhetoric over the years and the fact that SALT overwhelmingly benefited the very wealthy, not the middle class, it seemed like it should be a less controversial provision than others.
Most people who care about SALT are the wealthy in high-tax states, their well-compensated tax advisers, and a few economic policy wonks.
According to the Tax Foundation in 2016, prior to passage of the Tax Cuts and Jobs Act, nearly 80% of the benefit from the SALT deduction accrued to those making over $100,000, with just over 6% accruing to those making less than $50,000.
Pelosi’s new bill retroactively removes the $10,000 cap allegedly to help stimulate an economy damaged by the COVID-19 pandemic. Removing the SALT cap will fail to accomplish this goal for a number of reasons, but most obviously because doing so puts more dollars into the hands of people who are already rich.
If Pelosi wants to stimulate the economy, she should give workers relief through a payroll tax reduction. Provide relief for the businesses that create jobs, provide respite for investors that fund the innovations we need during this pandemic and after, but do not rerig our tax code in favor of rich people on the coasts at the literal expense of the heartland.

Shay Hawkins is the president of the Opportunity Funds Association and was the lead policy adviser to Sen. Tim Scott, a Senate Finance Committee member, during the drafting of the Tax Cuts and Jobs Act.