OPINION:
Last week, five blue-state Republican House members vowed to block any extension of the 2017 Trump tax cuts. They say they will vote to prevent the renewal of the tax cuts unless local and state taxes without real limits can again be deducted from federal income taxes.
A virtually evenly divided Congress gives one, two or a handful of members the power to blackmail party leaders and presidents to get their way. That’s exactly what Reps. Young Kim of California, Thomas Kean of New Jersey, and Andrew Garbarino, Nick LaLota and Michael Lawler of New York are doing. They are prepared to burn down the house to save money for their wealthiest constituents and donors regardless of the policy or political consequences.
The so-called SALT cap limits such deductions to $10,000 a year and expires at the end of the year as it is part of President Trump’s 2017 Tax Cuts and Jobs Act. Before the cap was enacted, Congress’ Joint Committee on Taxation found that taxpayers earning more than $100,000 in six states took 91% of the $24.4 billion in unlimited SALT deductions. Few middle-class taxpayers could afford to pay that much in taxes, but wealthy taxpayers, mostly living in very high-priced neighborhoods in blue states, saw their federal taxes increase.
Removing the SALT cap has been a Democratic priority since the day it went into effect. In 2021, the House included language in President Biden’s Build Back Better Act to raise the cap to $80,000 until 2030. That did not satisfy wealthy Democratic donors in blue states, although it would have been the costliest provision of the act if it had been adopted. Liberals may talk a good populist game, but eliminating SALT would cost the Treasury $64 billion a year, leaving that money in the hands of their wealthiest constituents.
Their “reforms” did not pass, but Forbes magazine concluded that any of the proposals would “overwhelming benefit high-income tax filers and do almost nothing for middle-income households.”
The 2021 proposals failed because proponents couldn’t agree on what they wanted, and “progressive” congressional Democrats were forced to argue for a regressive provision designed to reward only the nation’s wealthiest taxpayers. No matter what they tried to agree upon, the reform blew the budget on the Biden administration’s already bloated spending bill, arguably the largest in history.
Mr. Trump and Republican congressional leaders are now being blackmailed by members of their own party willing to blow up the Republican agenda to get their way for the sake of a fraction of their donors. Political reality may lead to some compromise, but Mr. Trump should draw the line early on how far he is willing to go.
The blue-state Republicans arguing for easing the cap justify their position on political rather than policy grounds, suggesting that Republican chances in states such as California, Illinois and New York depend on making it easier for their constituents to take an enhanced deduction. That is an empty argument. Republican gains are coming not from neighborhoods like New York City’s Hudson Yards, where the average home costs more than $7 million, but from middle-class neighborhoods.
When Mr. Lawler and 16 other blue-state Republicans met earlier this month with Mr. Trump at Mar-a-Lago to argue their case before the five announced their plans, the president-elect expressed some sympathy but urged them to come up with a number acceptable to all. What the five find acceptable was hinted at by Mr. Lawler late last week when he characterized a proposal to raise the cap from $10,000 to $20,000 as “laughable.”
Raising or indexing the cap because of Mr. Biden’s massive inflation may make sense so middle-class taxpayers are unaffected. But even so, the federal government should not be making the rest of us pay for gifts to the wealthy that make no economic sense. Mr. Trump has an overwhelming number of actual voters on his side on this issue. With a succinct explanation, voters will understand which states and neighborhoods want no cap and why.
SALT has been a deterrent to state spending, a way for the federal government to stop subsidizing the high-cost, high-debt, high-spending states. Voters are already moving in droves from those states, and they know why. Suppose five Republicans want to blow up Congress for SALT. In that case, they should be held accountable the next time they go to the polls for their willingness to blackmail their president and party into spending billions on their pampered constituents.
• David Keene is editor-at-large at The Washington Times.
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