Weakening the SALT Cap Would Be a Wasteful Giveaway During a Crisis

For Immediate Release

With the economy reeling due to the coronavirus (COVID-19) pandemic, some Members of Congress are reportedly considering retroactively raising the $10,000 cap on the state and local tax (SALT) deduction as part of any next economic package. The cap was enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017 and was one of the few responsible measures that helped offset some of the costs of the law. Weakening it would predominantly benefit high-income earners and do little to address the crisis. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

This bad idea is being raised at the worst possible time. We are dealing with a national emergency that will require dedicating significant resources to stem the effects of the virus and the deep economic downturn. This is not the time to load up emergency packages with giveaways that waste billions of taxpayer dollars on policies that aren’t targeted to where they are needed most.

Weakening or eliminating the SALT cap would be regressive, expensive, poorly targeted, and precisely the kind of political giveaway that compromises the credibility of emergency spending.

Since its enactment, some lawmakers have sought to repeal the cap, claiming it harms the middle class. These claims don’t hold up. Retroactively repealing the SALT caps for the last two years would mean sending a check of $100,000 to the household making over $1 million per year, and less than $100 for the average household making less than $100,000 per year. Raising the cap rather than eliminating it might mean less for the top, but would distribute no more to the bottom. As stimulus or economic relief goes, I’m not sure one could design a less targeted policy.

During this crisis, the Committee implores special interest lobbyists to stand down and lawmakers to put self-serving politics aside. We need our leaders to come together to pass legislation, as needed, that is laser-focused on the goal of saving lives and the economy, rather than engaging in politics as usual.

Because of reckless spending and unpaid-for tax cuts, we entered this crisis already facing annual $1 trillion deficits. While we need to borrow to handle this emergency, we shouldn’t waste the fiscal resources we have by failing to target them responsibly.

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For more information, please contact John Buhl, director of media relations, at buhl@crfb.org. Click here to read additional analysis on the SALT cap published today.