WASHINGTON — As president, Donald Trump has cut back on a lucrative tax break he used to enjoy coastal donors and suburban state voters. Now he’s promising to give back the discount — if they put him back in the Oval Office.
Trump’s aides say he is not bailing out, not even exceeding the $10,000 annual limit on the federal deduction that taxpayers can claim based on state and local taxes — the “SALT cap,” in Washington-speak. Instead, a campaign official said, Trump is responding to new economic realities as he seeks a “two-track” solution. The first is to promote pro-growth policies, and the second is to adopt tax positions that will allow Americans to keep more of their money.
Caroline Bruckner, managing director of American University’s Kogod Center for Tax Policy, said it was Trump’s needs that changed more than the economy.
“Replacing the cap on state and local taxes was an easy game to target revenue flowing to blue states,” Bruckner said of the 2017 law, which used the SALT cap as a budget substitute to pay for other tax cuts. “It now appears that high-income taxpayers in swing states have successfully made their case to Trump.”
The rollback is one of the freebies Trump and his running mate, Vice President Kamala Harris, are offering voters ahead of Election Day. Together, they promise equal tax relief in every pot.
Both candidates promise to block tip taxes for service industry workers. Trump says he will exempt seniors from taxes on Social Security payments. Harris takes a shot at the Biden administration’s proposals to expand the child tax credit and provide subsidies to first-time homebuyers. It also offers up to $50,000 in the first year for small business startups.
There are big spending promises like Trump’s announcement. details are still to be revealed — which will provide free in vitro fertilization treatment for people trying to conceive.
“Tis the silly season when everything is free,” said former Rep. Charlie Dent, a leader among GOP moderates in Congress.
“This is really one of the biggest issues in the country right now, there needs to be a serious conversation about some kind of funding cap,” Dent said. “Such offers are just to appeal to the audience. I can’t imagine that any of the things we’ve just listed will become law, but they make for good publicity and certainly raise expectations for people, and at the end of the day it leaves a lot of people disappointed and cynic.”
Each plum or carving appeals to a different segment of voters. All of them would add to annual federal deficits and accumulated national debt of more than $35 trillion. But none of them have an easy path to legal acceptance.
“Given the scale of our debt problems, I wish the candidates would compete on who can reduce the debt and save Social Security,” said Mark Goldwyn, senior vice president of the nonpartisan Committee for a Responsible Federal Budget. “Instead, they’re competing over who can spend more of our grandchildren’s money.”
In other words, the ice cream per meal portion of the campaign threatens to blow the budget.
While Goldwein’s group is still working on a comprehensive analysis of the financial implications of the two candidates’ platforms, the outlines are murky in red ink. Trump’s proposal to repeal the SALT cap, which expires next year if Congress takes no action, would reduce federal revenue. increased by 1.2 trillion dollars in ten yearsAccording to CRFB estimates.
Harris has unveiled proposals that would raise taxes on corporations, investors and high-income earners, which could result in a net reduction in deficits and debt — at least on paper. according to an analysis by the nonpartisan Tax Foundation. But it may be more politically feasible for President Harris to cut taxes, such as the $1.6 trillion it would cost to restore the child tax credit and increase it to $6,000 for the first year of a child’s life, than to raise them.
“Neither candidate is talking about major ways to reduce the deficit,” Goldwein said. “It looks like they’re both going to be red, and especially President Trump.”
Harris’ camp points to efforts to pay for some of his promises and Trump’s failure to do so.
“Donald Trump won’t pay for his agenda, but the middle class will: higher spending, cuts to Social Security and Medicare, and less economic opportunity,” Harris campaign spokesman James Singer said. “Vice President Harris will make billionaires and big corporations pay their fair share while building a middle class and creating an opportunity economy where everyone has a chance to compete and succeed.”
However, there are reasons to doubt Harris’ ability to pay for his platform.
One of Harris’ key proposals is to tax the paper gains of wealthy investors before their assets are sold — a “unrealized gains” tax that’s part of a broader plan to create a 25% minimum tax on all income for people who earn more. over $100 million a year. Like many of the policies Harris has announced since becoming the Democratic nominee, it closely follows President Joe Biden’s agenda, which never featured prominently.
“Every conversation I’ve had is that it’s not going to happen,” billionaire Mark Cuban, a Harris supporter, told CNBC in an interview earlier this month. “If you tax unrealized gains, you’ll kill the stock market.”
Trump’s return to the SALT cap has raised eyebrows on both sides because it paid for a significant portion of the tax cut he signed in 2017 — and the repeal he’s now approved will help many blue-state voters at the expense of red-state voters.
However, from the point of view of electoral politics, this may be an issue. He could upset voters in some low-tax states — many in the Deep South — that he is likely to win by large margins. No one thinks the plan will sway Republicans in states like South Carolina and Mississippi to vote for Harris.
But the tax giveaway could help attract donations at a time when his campaign is desperate to keep up with the flood of money pouring into Harris’ coffers. The top ten list of states with the highest average reported state and local tax burdens for taxpayers itemizing deductions are donor havens, according to data collected by the Tax Foundation and analyzed by NBC News.
They are: Manhattan; Three counties that include San Francisco and Silicon Valley; counties with the most beautiful western resorts – Sun Valley, Idaho, Aspen, Colorado and Jackson Hole, Wyoming; and the upscale suburbs of Westchester County, New York and Fairfield County, Connecticut.
The plan may have a smaller but more noticeable impact on suburban voters, including voters in swing states. In Maricopa County, Arizona’s largest, Trump lost 2.2 percentage points in 2020 and went on to a smaller defeat statewide. According to the Tax Foundation, the average taxpayer in the county deducted $14,083 in state and local taxes — about $4,000 above the limit on deductions imposed by Trump.
Trump smoked in the suburbs around Philadelphia in 2020, in part because Biden — from nearby Wilmington, Delaware — is a familiar presence in local media. But many voters in these states would greatly benefit from the repeal of the SALT ban. In each of these states—Montgomery, Chester, and Delaware—the average taxpayer paid nearly double the state and local taxes. The same was true for Pittsburgh’s Allegheny County in the western part of the state.
“In Philadelphia’s collar counties, where property taxes are pretty high, you know, it makes a difference,” Dent said, adding that it might make more sense to raise the cap a little bit and not index — rather than repeal. he
“You end up protecting more middle-income, upper-middle-income people who might be adversely affected,” Dent continued, without cutting federal revenue to protect the wealthiest taxpayers.