Pelosi’s SALT Scheme Crushed By Economists

Speaker Pelosi Says ‘Phase 4’ Is ‘A Wonderful Opportunity’ To Repeal The Cap On The State And Local Tax Deduction, (SALT) Which Would Benefit High Earners In Blue States

“As lawmakers prepare for another round of fiscal stimulus to address economic fallout from the coronavirus pandemic, Speaker Nancy Pelosi suggested the next package include a retroactive rollback of a tax change that hurt high earners in states like New York and California. … In an interview with The New York Times, Ms. Pelosi said the next phase of an economic rescue package should include additional measures to get more money directly to individuals … That could be achieved, she said, by having Congress ‘retroactively undo SALT,’ a reference to a cap on the state and local tax deduction that Republicans included in their 2017 tax overhaul. That limit prevents households from deducting more than $10,000 a year in state and local tax expenses from their federal tax bills.” (“Pelosi Floats New Stimulus Plan: Rolling Back SALT Cap,” The New York Times, 3/30/2020)

• “Pelosi’s proposals include easing limits on federal deductions for state and local taxes, a curb the GOP-controlled Congress enacted in 2017 that’s hit high-income, Democratic-leaning states the hardest. Her suggestion has run into opposition from both parties.” (“Early Divisions As Congress Weighs Next Help For Economy,” The Associated Press, 4/1/2020

• “Still, it’s not too hard to see what Pelosi might be trying to do, and why other Democrats might be cheering her on. … House Democrats, who made large gains in upscale suburbs as they took the majority in the 2018 elections, targeted the SALT cap all last year and eventually passed a measure to kill it for two years.” (“Economists Pan Pelosi’s Proposal To Lift Cap On State And Local Tax Deductions In Next Bailout,” Politico, 3/31/2020)

HOUSE SPEAKER NANCY PELOSI (D-CA): “I hope that in this next bill that we will be able to address the concerns of our state and local governments. That is absolutely essential. We need to do more. We need to do more by way of our appropriations, by way of our tax code and by way of policy and also by way of the Fed doing more to help the state and local governments with the challenges that they face which are massive.” (MSNBC’s “Morning Joe,” 3/31/2020)

• SPEAKER PELOSI: “It’s a wonderful opportunity… because I think our country is united in wanting to not only address the immediate needs of the emergency and mitigation for the assault on our lives and livelihood, but also how we recover in a very positive way.” (“Early Divisions As Congress Weighs Next Help For Economy,” The Associated Press, 4/1/2020)

FLASHBACK: House Democrats See The Coronavirus Crisis As ‘A Tremendous Opportunity To Restructure Things To Fit Our Vision’

HOUSE MAJORITY WHIP JIM CLYBURN (R-SC): “This is a tremendous opportunity to restructure things to fit our vision...” (“House Democrats Eyeing Much Broader Phase 3 Stimulus,” The Hill, 3/19/2020)

Senate Republicans Blast Speaker Pelosi’s Proposed SALT Cap Repeal As A ‘Nonstarter’ And ‘A Grab Bag For [The] Liberal Wish List’

SENATE FINANCE COMMITTEE CHAIRMAN CHUCK GRASSLEY (R-IA) SPOKESPERSON: “This is a nonstarter. Millionaires don’t need a new tax break as the federal government spends trillions of dollars to fight a pandemic.” (“Grassley Rips Pelosi Bid To Roll Back Deduction Cap: ‘Millionaires Don’t Need A New Tax Break,” Fox News, 3/31/2020)

SEN. TIM SCOTT (R-SC): “After wasting four days trying to pass the Green New Deal as part of the last coronavirus relief package, now Speaker Pelosi wants to hand out billions of dollars to millionaires… This is offensive to the American people, counterproductive to helping those most in need, and would never pass the Senate. Pandemic relief is supposed to help the American people, Speaker Pelosi, not serve as a grab bag for your liberal wish list.” (Sen. Tim Scott, Press Release, 3/31/2020)

Economists Say Repealing The SALT Cap Is ‘Regressive Tax Policy’ That ‘Would Not Benefit The People Who Need Help’

“Economists and tax experts from across the political spectrum are panning House Speaker Nancy Pelosi’s idea to stimulate the economy in the next bailout bill by raising the federal cap on tax deductions for state and local taxes. The move wouldn’t give the economy much of a boost, they say.” (“Economists Pan Pelosi’s Proposal To Lift Cap On State And Local Tax Deductions In Next Bailout,” Politico, 3/31/2020)

KARL SMITH, Vice President of Federal Tax and Economic Policy at the Tax Foundation: “A retroactive repeal is the worst of both worlds… It increases the probability that bad tax policy will be made permanent without the certainty to even allow the potential side-benefits to real estate markets and state and local government to materialize.” (“Economists Pan Pelosi’s Proposal To Lift Cap On State And Local Tax Deductions In Next Bailout,” Politico, 3/31/2020)

“Many liberal economic policy analysts also oppose lifting the SALT cap, calling it regressive tax policy.” (“Pelosi Floats New Stimulus Plan: Rolling Back SALT Cap,” The New York Times, 3/30/2020)

• SETH HANLON, a Senior Fellow at the Liberal Center for American Progress: “[T]here are ways you could target it to truly middle-class people. The problem is, relatively few middle-class people claim SALT. … [I]t doesn’t strike me as the most effective way of targeting economic stimulus.” (“Pelosi Floats New Stimulus Plan: Rolling Back SALT Cap,” The New York Times, 3/30/2020)

• MICHAEL LINDEN, Executive Director of the Progressive Groundwork Collaborative: “This is not a good idea… It would not help the economy heal, and it would not benefit the people who need help. … These are people who won’t spend the extra money and don’t really need it… That’s why they were left out of the cash assistance in the first place.” (“Economists Pan Pelosi’s Proposal To Lift Cap On State And Local Tax Deductions In Next Bailout,” Politico, 3/31/2020)

‘Democrats Are Far From Finished Using The Crisis To Try To Force Through Partisan Priorities They Couldn’t Pass In Normal Times’

THE WALL STREET JOURNAL EDITORIAL BOARD: “House Speaker Nancy Pelosi held up last week’s coronavirus relief bill with demands related to corporate diversity, carbon emissions and election reform. But Democrats are far from finished using the crisis to try to force through partisan priorities they couldn’t pass in normal times. Mrs. Pelosi is now hinting the price for further economic relief may include expanding a regressive tax deduction for high-earners in states run by Democrats. … Blowing up the state and local tax deduction would reduce the tax base and increase pressure for higher tax rates. It would also make it easier for poorly governed states to rely on soaking their high earners through capital-gains and income taxes, because the federal deduction would ease the burden.” (Editorial, “Pelosi Pitches A Blue-State Bailout,” The Wall Street Journal, 3/31/2020)

• “Democrats have been trying to repeal the SALT cap since tax reform passed. They’ve tried lawsuits, state-level accounting gimmicks and acts of Congress. The last House bill repealing the SALT cap passed in December 2019 but didn’t go anywhere in the Republican-controlled Senate. Mrs. Pelosi may be hoping that in an election-year crisis atmosphere the upper chamber would have no choice. … Mrs. Pelosi’s remarks underscore the potential for further political mischief and long-term damage as the government intervenes to stimulate the economy. When Democrats next complain that Republicans want to cut taxes ‘for the rich,’ remember that Mrs. Pelosi wants to cut them too—but mainly for the progressive rich in Democratic states.” (Editorial, “Pelosi Pitches A Blue-State Bailout,” The Wall Street Journal, 3/31/2020)

NEW YORK POST EDITORIAL BOARD: “Someone ought to tell Speaker Nancy Pelosi about the coronavirus outbreak, because her laser focus on pushing her political agenda suggests she’s unaware of it. The latest evidence: She wants to ‘retroactively’ roll back Congress’ 2017 cap on tax deductions for state and local taxes (SALT), The New York Times reports. … But her idea has nothing to do with boosting the economy and everything to do with helping Dems in blue states, like California, New York, New Jersey and Illinois. More than half the benefits of a repeal would go to folks making more than $1 million. Don’t Dems oppose tax breaks for the rich? … These various moves show that Pelosi isn’t really taking the crisis seriously — she’s just looking for an excuse to get her partisan priorities passed.” (Editorial, “Does Nancy Pelosi Know About The Coronavirus Outbreak?,” New York Post, 3/31/2020)