Memo to Mitch: Repeal the Republican tax increase
It is often forgotten that the big Republican tax “cut” in 2017 actually raised taxes on about 10 percent of Americans. Some people weren’t rich enough to get much of an income tax rate reduction but they still lost the ability to deduct all of their state and local taxes (known as “SALT”). The law capped SALT deductions at $10,000 per year.
Democrats want to repeal this tax increase. Republicans want to keep the tax increase around. That is not a misprint. If you didn’t think Washington could get any weirder, it has.
The leading rationale for keeping the tax increase comes from Senate Majority Leader Mitch McConnell (R-Ky.) He says repealing it will lower taxes only on “blue-state millionaires.” But the senator is wrong in theory and wrong on the facts.
First, the theory. Since when did we Republicans have a problem lowering taxes on millionaires? Or care what state you lived in? Certainly not since the Republican Revolution of 1994. Until the SALT cap, the Republican Party hadn’t supported a tax increase like this in over 25 years. Indeed, the reason many Republicans are Republicans to begin with is because of our party’s straightforward tax cutting philosophy. We’ve turned our back on a lot of our principles in the last couple of years; let’s not turn our back on this one, too. We should not let the Democratic Party be the party that cuts taxes. Even this one time.
Next, the facts. The truth is that the SALT cap ensnares lots of people who are not millionaires and who do not live in blue states. Consider my state of Tennessee. We are as red as you can find. We don’t even have a state income tax. Yet, plenty of my neighbors are caught up in the SALT cap. In my hometown of Nashville, the median house is worth around $300,000. The property taxes on a house with that sticker price in 2019 were around $2,500 a year. We also have a sales tax of 9.25 percent. That means anyone who spends $80,000 a year on taxable stuff pays another $7,500 in sales taxes. That’s $10,000 in SALT right there. In other words, lots and lots of non-millionaires in Tennessee and other states are running smack into the SALT cap.
But here’s the cruelest part: the facts are going to get much, much worse. State and local governments have lost billions upon billions of dollars in tax revenue to COVID-19. If the federal government doesn’t bail them out — something else Sen. McConnell doesn’t want to do — then they will have no choice but to raise taxes to balance their budgets. In other words, many more than 10 percent of us are going to end up ensnared by the SALT cap in 2020.
This is not idle speculation. Nashville just increased property taxes 34 percent. Many other cities are looking at similar or even more dramatic tax increases. Many of them are in red states.
Sen. McConnell: We should not look a gift horse in the mouth. Whenever Democrats want to cut taxes, we should take “yes” for an answer. If we want to make America great again, we can start by leaving no taxpayer left behind.
Brian Fitzpatrick is a law professor at Vanderbilt Law School in Nashville, Tenn. He was a law clerk in the U.S. Supreme Court for Justice Antonin Scalia and a staffer to U.S. Senator John Cornyn (R-Texas). He is the author of the book, “The Conservative Case for Class Actions.”