Karl W. Smith, Columnist

The Democrats Go to Bat for the Wealthy

The House’s effort to raise and extend the cap on SALT deductions is clever legislating but bad policy.

November 4, 2021 at 8:15 PM UTC

Karl W. Smith is a Bloomberg Opinion columnist. Previously, he was vice president for federal policy at the Tax Foundation and assistant professor of economics at the University of North Carolina.

No signs about the cap on the SALT deduction.
Photographer: Eugene Gologursky/Getty Images North America

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In the latest version of the White House’s Build Back Better plan, House Democrats have managed to offer big refunds to wealthier taxpayers in blue states while keeping the official cost of the plan under $1.75 trillion. While one can’t help but admire their legislative ingenuity, the move is a costly gimmick — and bad policy.

First, some background: As part of 2017’s Tax Cuts and Jobs Act, Republicans capped the amount of state and local taxes individual filers could deduct on their federal tax returns at $10,000. The complete elimination of the SALT deduction has long been a goal of tax reformers, and many viewed the cap as a step in the right direction. But the move was also seen — and even touted by some Republican operatives — as an attack on blue states that have a combination of high tax rates and wealthy residents.