The SALT squeeze

Congress must ig­nore Kud­low, keep press­ing for restora­tion of the de­duc­tion

The Buffalo News - - OPINION -

Pres­i­dent Trump’s top eco­nomic ad­viser was rub­bing SALT in New York State’s wounds when he said this week that Congress in un­likely to undo the $10,000 cap on state and lo­cal tax de­duc­tions it im­posed in 2017.

The cap, part of a tax over­haul bill ini­ti­ated by the Trump ad­min­is­tra­tion and passed by con­gres­sional Repub­li­cans, came as a jolt in high-tax states like New York whose vot­ers also tend to fa­vor Democrats, giv­ing the bill more than a hint of po­lit­i­cal pay­back.

Larry Kud­low, direc­tor of the Na­tional Eco­nomic Coun­cil, told re­porters at a break­fast meet­ing in Wash­ing­ton on Wed­nes­day that there is lit­tle ap­petite in Congress for chang­ing the limit on state and lo­cal taxes (called SALT), de­spite the pres­i­dent say­ing in Fe­bru­ary that he would be open to re­vis­ing it.

Un­der pre­vi­ous law, tax­pay­ers across the coun­try could deduct all their state and lo­cal taxes.

Kud­low con­tends that the SALT cap is pri­mar­ily a rich peo­ple’s prob­lem. He said many wealthy home­own­ers earned enough to be forced to pay the Al­ter­na­tive Min­i­mum Tax, a spe­cial rate that doesn’t al­low for de­duc­tions. The 2017 tax bill boosted AMT ex­emp­tion lev­els, giv­ing more high-in­come earn­ers the abil­ity to item­ize de­duc­tions.

The ar­gu­ment that “we’re only hurt­ing the rich, so ev­ery­thing’s fine” is an in­ter­est­ing ar­gu­ment for a Re­pub­li­can ad­min­is­tra­tion of­fi­cial to make, but it doesn’t hold up.

The def­i­ni­tion of “mid­dle class” is al­ways up for de­bate, but in New York State it’s clear that hav­ing state and lo­cal tax bills that amount to more than $10,000 doesn’t only hap­pen to peo­ple who drive Rolls-Royces. The fed­eral SALT cap was a blunt po­lit­i­cal in­stru­ment in­tended to hurt the blue state that Pres­i­dent Trump calls home, and it’s work­ing. Last month Gov. An­drew M. Cuomo said that 52 coun­ties in New York have av­er­age taxes above the SALT cap, mean­ing their av­er­age tax­payer is fac­ing a tax in­crease.

Kud­low’s answer is that New York State could al­ways lower its taxes. That sen­ti­ment was echoed by Rep. Tom Reed, R-Corn­ing, who serves on the tax-writ­ing Ways and Means Com­mit­tee. Reed, in an Another Voice col­umn pub­lished March 6 in The News, wrote that if Cuomo and the State Leg­is­la­ture low­ered taxes across the board, “the SALT cap would be a non-is­sue.”

New York’s taxes are too high, as we have ob­served many times, but no one has yet come up with a magic for­mula to shrink them. Pun­ish­ing New York­ers by rais­ing their fed­eral taxes doesn’t ex­actly fit “the crime” of liv­ing in our state.

Reed, who along with Rep. Chris Collins of Clarence voted “yes” on the 2017 tax over­haul, talks vaguely about be­ing open to the idea of re­vis­ing the SALT cap, but he’s not about to rock any Re­pub­li­can boats.

Rep. Brian Higgins of Buf­falo is part of a group of Democrats who are try­ing to come up with an al­ter­na­tive to the SALT cap that could be ac­cept­able to mem­bers of both po­lit­i­cal par­ties. He needs to con­tinue press­ing the case.

When it comes to the fed­eral trea­sury, New York is a donor state that sends bil­lions more to Wash­ing­ton than it gets back. To use a New York ex­pres­sion that Kud­low knows well from work­ing on Wall Street: Give us a break!

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