It's well past time to adjust the SALT Cap in the Tax Scam

As you may be aware, I despise the massive giveaways to the rich that were part of the costly GOP Tax Scam of 2017. And while I'd be supportive of the whole Scam going away when those tax cuts expire next year, one place in particular where I would like to see changes made is with the limitations put in on deductions for State and Local Taxes (SALT).

The SALT Cap was put in place with the rest of the Tax Scam in 2017, and like much of the rest of the tax package, there wasn't enough votes to change it even when Democrats had control of the House from 2019-2023 and the Senate from 2021-2023. Now the question becomes whether Republicans can oversee changes to their own Tax Scam that would raise or even remove the SALT Cap as part of the expiration of the Tax Scam at the end of 2025.

And it looks like the tiny majority the GOP has in the House might allow several swing-seat Republicans the opportunity to work out a deal on the SALT Cap, as it appears that issue will be a centerpiece of a meeting at Mar-a-Lago among GOPs this weekend. Even if GOPs try to keep the rest of the Tax Scam in place, it may well be the case that the SALT Cap gets some kind of adjustment.

While exact details weren't available, one proposal being discussed would allow married couples to deduct $20,000 of their state and local taxes from their federal income taxes. Under current law, married couples can deduct only $10,000, which is the same for single taxpayers.

In return, the so-called SALT Republicans will be expected to fall in line behind a sweeping tax bill the GOP hopes to enact later this year, two sources familiar with the new administration’s thinking told POLITICO, who were granted anonymity to discuss the internal strategizing.

The lawmakers — who represent politically competitive, high-tax districts where constituents have been dinged by the SALT cap — haven't ruled out pushing for other changes, though....

It’s possible that the group will push for something more than doubling the deduction for married couples, which the lawmakers call a "marriage penalty." The New Yorkers [in the group] are quick to point out that Trump himself pledged at a campaign rally in Long Island to expand SALT relief — and that the blue districts they represent are some of the most competitive in the country.

Let’s go back to 2018’s House elections, which took place 1 year after the SALT Cap and the rest of the GOP Tax Scam was put in place. Note that a significant part of the Democrats’ gains came in states such as California (6 seats), New Jersey (4 seats), New York (3 seats), and Illinois (2 seats) and Minnesota (2 seats).

The biggest argument against any type of SALT Cap change is that the move would end up being regressive, as the bottom 3/5 of incomes generally would get a bigger benefit from using the standard deduction in all situations. The best breakdown I could find in recent times came from the Institute on Taxation and Economic Policy (ITEP) in 2021. And it used an example of raising the SALT Cap to $15,000 for singles and $30,000 for married couples to show how it would limit the cost of the tax breaks, and keep the richest Americans from getting a windfall.

This is where we need to remember that the SALT Cap has not been adjusted to the inflation Americans have dealt with since the Tax Scam was put into effect. If you punch up the inflation calculator, and look at how much $10,000 in December 2017 would be worth today, you get nearly $12,800. Add another 2.74% for 2025 (to match what the standard deduction will increase by due to inflation), and you get $13,150. Then throw in the marriage penalty part, which is rare for a deduction not to be doubled up for married, joint filers, and it's especially infuriating for 2-income married couples (raises hand).

This is where I'll remind you that Paul Ryan and company put that marriage penalty into the Tax Scam as a way to limit the absurd overall cost of the package, because God Forbid we make mega-millionaires and billionaires pay another 1% in tax instead.

Still soooo punchable.

So let's fix that flaw, index the SALT Cap to inflation and then double the Cap for married joint filers, which would increase the Cap from $10,000 today to $26,300 for a married couple. Given that we have an upper middle-class income (and the state taxes that go with it) and are facing a property tax bill of more than $9,200, expanding the SALT Cap could well allow us to write off our property taxes, state income taxes, mortgage interest, and charitable gifts – which we have not been able to do since the Tax Scam came into being.

And I’m betting I’m not alone in Wisconsin these days, especially in a time of rising property taxes, rising incomes, and rising home values. I understand that many people have it worse than me, but that doesn’t change the fact that it’s been the upper middle-class that has been the group hurt by the GOP Tax Scam and the SALT Cap that went with it. And a combination of approving a wider SALT Cap for married couples but keeping some limits on it will be the sweet spot that doesn’t give huge benefits to the rich, but does help those that would be more likely to take advantage of the relief, and it might well help make housing more affordable and worthwhile for people.

I know it's not thought of as particularly progressive to support a tax cut that helps upper-middle class and upper-class taxpayers. But I see the change in incentives and targeted limits of assistance to be helpful for our economy and fairer in general. Dems should ask for SALT Cap changes to be separated out from the rest of the Tax Scam, and if GOPs won't do that and chooses to fold it into the larger tax package, then they don't get any help and the deficit-busting package goes down in flames.

Sounds like a win-win to me!