Buried inside the Republicans’ trillion-dollar tax-cut proposal is a change that hurts Massachusetts, raises taxes on millions of families — and that, in other circumstances, progressives might eagerly endorse.
Under current law, families don’t have to pay federal income tax on money they use to cover their local tax bills. So if you earn $100,000, but pay $20,000 total in state income and local property taxes, the feds act as if you earned $80,000. It’s called the deduction for state and local taxes, or SALT, and it can make a real difference in how much you pay, or what you get for a refund.
Should the Republican plan pass, however, the deduction might disappear. Which means that even under this plan — which President Trump called the “largest tax cut in our county’s history” — taxes would actually go up for a quarter of all households nationwide, and probably more in Massachusetts.
Politically, this creates an unexpected problem, in the form of voters — including plenty of Republicans — who would lose money and who might push back hard.
But it also puts progressives in a tricky spot: They can’t push too hard on the critique that Trump’s approach is bad because it would raise taxes. Many of the best-laid progressive plans require tax increases, including single-payer health care, universal basic income, paid maternity leave.
It’s equally risky to advance the increasingly familiar argument that Trump’s plan would be especially painful for liberal states like Massachusetts and New Jersey. That’s because most any progressive plan would do the same. Blue states tend to be richer, so any plan to raise taxes on the rich is going to hit them extra hard.
In many ways, eliminating SALT is the kind of tax increase progressives generally endorse. True, it isn’t narrowly targeted at the “top 1 percent” types often singled out by movement leaders such as Bernie Sanders and Elizabeth Warren, but it does chiefly affect higher-income Americans.
Across the nation, only about 10 percent of households earning less than $50,000 per year claim the SALT deduction, and those that do get very little out of it.
The situation changes quickly as you climb the income ladder. Approximately two-thirds of families earning between $100,000 and $200,000 save money by using SALT, with an average write-off of more than $10,000.
At the top, households earning more than $1 million get an average SALT deduction of more than $250,000.
All this is compounded in Massachusetts because we have a lot of affluent households. Families earning $100,000 to $200,000 are about 25 percent more prevalent here than nationwide, and millionaires are 60 percent more common, according to IRS data.
This creates a cascading effect. If Republicans do eliminate the SALT deduction, it wouldn’t just hurt higher-income households — it would disproportionately affect residents in blue states like Massachusetts, which tend to have more higher-income households.
But so what? Protecting the interests of liberal states is hardly a core ideal of the progressive movement. To the contrary, helping poor Americans often means taking money out of blue states. And SALT is one possible example.
Now, it’s also true that the SALT deduction helps states raise taxes with fewer complaints, because locals can write off some of the costs. But it’s not clear whether that’s a sufficient reason to keep SALT in place. Especially if eliminating this deduction would free up money for investments and public programs in places that have been left behind: things like health care in rural towns, job training across the Rust Belt, and school funding in underperforming districts.
Does this mean progressives should consider supporting Trump’s trillion-dollar cuts? That’s surely a step too far, given that he’s eliminating the SALT deduction in order to pay for massive corporate tax cuts, in hopes of spurring business investment and making America more competitive with lower-tax countries.
The nonpartisan Tax Policy Center estimates this would be a huge windfall for the wealthiest, meaning that the Trump plan effectively takes tax dollars from the relatively well-off and gives them to the extremely well-off.
But it’s worth at least trying to keep these things separate: the Republicans’ plans for raising revenue, and how they want to spend it.
Whether you support the idea of eliminating the SALT deduction probably depends less on some inherent virtue of that longstanding tax break and more on the practical question of how that money will be used.Evan Horowitz digs through data
to find information that illuminates the policy issues facing Massachusetts and the United States. He can be reached at email@example.com. Follow him on Twitter @GlobeHorowitz.