EDITORIAL: Too much SALT is bad for fiscal health
Donald Trump has a positive track record on tax and regulatory reform. But he also has some bad ideas.
At the recent Al Smith charity dinner event, Mr. Trump expressed support for undoing part of his 2017 tax bill. “I work with whoever I have to, and we will even work very hard to bring back the SALT tax deduction,” Mr. Trump said during his speech. “We’re going to bring it back.”
This isn’t the first time Mr. Trump has floated this idea. Before a September rally on Long Island, Mr. Trump wrote on Truth Social that he would “get SALT back, lower your taxes, and so much more.”
SALT stands for “state and local tax.” It refers to the ability of taxpayers to deduct those levies from their personal income on federal tax returns. In California, the top state income tax rate is more than 13 percent. In New York, it’s 10.9 percent. Wealthy individuals often pay hefty amounts in property taxes too.
In 2017, Mr. Trump’s Tax Cuts and Jobs Act capped the SALT tax deduction at $10,000. In 2022, less than 10 percent of taxpayers itemized their deductions thanks to the higher standard deduction. If someone is paying substantially more than $10,000 in state and local taxes, they are almost certainly financially well off.
“According to the Joint Committee on Taxation, more than 88 percent of the benefit of state and local tax deductions accrued to those with incomes in excess of $100,000 in 2014, while only 1 percent flowed to taxpayers with incomes below $50,000,” Jared Walczak, vice president of state projects with the Tax Foundation, wrote in a 2017 report.
Given that, one might assume that Democrats were thrilled that Mr. Trump capped this deduction. After all, they usually oppose regressive tax breaks.
You would be wrong. The SALT tax deduction disproportionately benefited those in deep blue states with high taxes.
“Six states — California, New York, New Jersey, Illinois, Texas, and Pennsylvania — claim more than half of the value of the deduction,” Mr. Walczak wrote in 2017.
Politicians in California and New York loved the SALT deduction because it artificially lowered the cost of their states’ high taxes, making it more palatable for their constituents to tolerate their profligacy. Without the deduction, high-earning taxpayers bear the full burden of high state and local taxes.
The easy solution is to lower those tax rates. But Democrats aren’t interested in that, and many blue state voters now want their deduction back. Mr. Trump understands the politics, which is why he’s been promoting it. But taxpayers across the country shouldn’t have subsidize wealthy taxpayers in profligate states such as California and New York.
Mr. Trump recently made headlines working a stint at a McDonald’s. Salty fries taste great, but otherwise he needs to pull back on the SALT