Washington has too much SALT in its diet

State and local tax deductions, commonly referred to within the Washington beltway as “SALT,” have become a lightning rod for bipartisan criticism over the past few weeks – a flashpoint that has received national attention.

Under H.R. 5376, the so-called “Build Back Better Act” that was passed by the U.S. House on November 19, the $10,000 cap on state and local tax deductions – previously set under the Tax Cuts & Jobs Act – would be raised to $80,000 through 2030. The Committee for a Responsible Federal Budget, a nonpartisan organization in Washington, estimated that raising the SALT cap to $80,000 equates to a gift of $625 billion in perpetuity to wealthy Americans.

So why are most Washington Democrats so enamored by raising SALT deductions this go-round? Speaker Nancy Pelosi claimed that raising SALT deductions is, “…about which states get the revenue that they need in order to meet the needs of the people.” That stance doesn’t bode well with others in the Democrat Party. Jason Furman, the former chair of Barack Obama’s Council of Economic Advisers, and current Harvard economist, called this giveaway “obscene.”

Even Representative Jared Golden, a Democrat from Maine who voted against the so-called “Build Back Better Act” due to its SALT provision, was concerned with “tax giveaways to millionaires”.

Consider who will reap these benefits. With the tax-deduction cap set at $80,000 – with no income limit strings attached – the households with the highest income would be saving $25,900 more than they do under the current law. The Tax Policy Center, a think tank formed under the left-leaning Urban Institute and Brookings Institution, found that this $80,000 cap would directly benefit the top one percent of households – with middle to lower income households being left behind.

With only 5.4% of households earning more than $200,000 per year in North Carolina, few people would receive this handout. The good news is that under the recently passed budget in the General Assembly, our state’s tax rates would be reduced to 4.9% in 2022. This means that less money would be available to be deducted under SALT by the select few high earning households while middle-income earners throughout the Tar Heel state would continue to benefit. Other states should follow North Carolina’s lead.

High-income states such as California, New York, and New Jersey have historically benefitted from SALT cap deductions – with North Carolina being far removed from the conversation. In Washington, the common refrain of “tax the rich” among members of the majority has become even more moot now that middle-income households are getting even more of the short end of the stick.

Economic experts, Republicans, and even Democrat members of the House and Senate agree that Washington has too much SALT in its diet. If the majority believes upping SALT deductions and leaving both middle-and lower-income Americans behind is a viable route to take, the consequences could be a lot more than they bargain for. The Senate should kill this spending package immediately.

U.S. Rep. Virginia Foxx represents North Carolina’s 5th Congressional District and is Republican Leader of the House Committee on Education and Labor.