Tax Foundation: Bill to roll back SALT deduction cap would cost $223B

Tax Foundation: Bill to roll back SALT deduction cap would cost $223B
© Greg Nash

A Democratic bill to roll back but not fully repeal the GOP tax law's cap on the state and local tax (SALT) deduction would lower federal revenue by $223 billion over 10 years, according to an analysis released Monday by the right-leaning Tax Foundation.

Reps. Lauren UnderwoodLauren UnderwoodObama announces first wave of 2020 endorsements The Hill's Coronavirus Report: GoDaddy CEO Aman Bhutani says DC policymakers need to do more to support ventures and 'solo-preneurs'; Federal unemployment benefits expire as coronavirus deal-making deadlocks The Hill's Coronavirus Report: iBIO Chairman and CEO Thomas Isett says developing a safe vaccine is paramount; US surpasses 150,000 coronavirus deaths with roughy one death per minute MORE and Sean CastenSean CastenThe Hill's Campaign Report: Buzz builds around Warren for VP Gun control group rolls out House endorsements Human Rights Campaign rolls out congressional endorsements on Equality Act anniversary MORE, both freshman Democrats from Illinois, introduced legislation in March to raise the SALT deduction cap to $15,000 for individuals and $30,000 for married couples, and adjust the cap for inflation. The GOP tax law imposes a cap of $10,000 for both single and married filers.

Republicans included the SALT deduction cap in their 2017 law in order to raise revenue to help pay for tax cuts in the measure. But lawmakers on both sides of the aisle from high-tax states have expressed concerns that the provision will disproportionately hurt their constituents.


Most taxpayers even in high tax states are getting a tax cut from President TrumpDonald John TrumpWhite House sued over lack of sign language interpreters at coronavirus briefings Wife blames Trump, lack of masks for husband's coronavirus death in obit: 'May Karma find you all' Trump authorizes reduced funding for National Guard coronavirus response through 2020 MORE's law, but a small percentage of taxpayers saw an increase for 2018 due to the SALT deduction cap.

The Tax Foundation estimated that Underwood and Casten's bill would cost more than $200 billion from 2020 to 2029, and that all of that revenue impact would take place from 2020 to 2025. That's because the cap, along with most other individual tax provisions in the 2017 law, expires after 2025, the group said.

The think tank estimated that Underwood and Casten's bill has a smaller price tag than other bills lawmakers from high-tax states have introduced in recent months to completely eliminate the SALT deduction cap.

The Tax Foundation estimated that a bill from Rep. Bill PascrellWilliam (Bill) James PascrellLawmakers urge administration to remove tariffs on European wine and spirits amid coronavirus pandemic The Hill's Campaign Report: Florida's coronavirus surge raises questions about GOP convention New Jersey Rep. Bill Pascrell wins Democratic primary MORE (D-N.J.) and Bob MenendezRobert (Bob) MenendezVOA visa decision could hobble Venezuela coverage Bottom line Koch-backed group urges Senate to oppose 'bailouts' of states in new ads MORE (D-N.J.) to fully restore the SALT deduction and raise the top individual rate from 37 percent to 39.6 percent would lower federal revenue by $532 billion from 2019 to 2028. The group estimated that a bill from Rep. Nita LoweyNita Sue LoweyHelping our seniors before it's too late House approves .3 trillion spending package for 2021 House approves two child care bills aimed at pandemic MORE (D-N.Y) and Pete KingPeter (Pete) KingCheney clashes with Trump Coronavirus Report: The Hill's Steve Clemons interviews Rep. Sean Patrick Maloney On The Money: 3 million more Americans file for unemployment benefits | Sanders calls for Senate to 'improve' House Democrats' coronavirus bill | Less than 40 percent of small businesses have received emergency coronavirus loans MORE (R-N.Y.) to fully restore the SALT deduction would cost more than $600 billion in that time frame.

Kyle Pomerleau, who wrote the Tax Foundation's report, said on Twitter that Underwood and Casten's proposal is "much more workable" than other proposals on the SALT deduction.

Underwood and Casten said when they introduced their bill that they assume some sort of pay-for would be attached to their bill if it moved through Congress. They also said that they proposed legislation to raise the SALT deduction cap rather than fully repeal it so that they could focus tax relief on the middle class.

However, the Tax Foundation estimated that those in the top 10 percent of income would benefit the most from the bill. The group estimated that those in the bottom three-fifths of income wouldn't be affected by the bill, because those taxpayers typically are utilizing the 2017 tax law's larger standard deduction rather than itemizing their deductions.

Casten and Underwood said Monday in a statement: “The Republican tax law failed to put middle class families first. Our legislation would help Illinois families disproportionately burdened by the changes to the State and Local Tax deduction to ensure middle class families aren’t excessively burdened with an unfair double-tax.”

Democrats have frequently criticized the Tax Foundation, which is generally supportive of the GOP tax law.

Trump said in a tweet Monday that New Yorkers "didn’t even put up a fight against SALT - could have won." Democratic lawmakers responded to the tweet by saying they did fight against the SALT deduction cap and that if Trump wants to restore the full deduction, he should work with them.

-updated at 4:16 p.m.