NTU Urges Representatives to Oppose Legislation Uncapping the SALT Deduction

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National Taxpayers Union urges all Representatives to vote “NO” on H.R. 5377, the “Restoring Tax Fairness for States and Localities Act.” This legislation would undo some of the many benefits of the Tax Cuts and Jobs Act (TCJA), raise taxes on small businesses across the country, and add to the complexity of the federal tax code. 
 
Enacted in 2017, the TCJA made several important changes to the individual side of the federal tax code. By significantly reducing income tax rates and increasing the standard deduction, the tax code is fairer and simpler than before. TCJA rightly reformed many deductions and credits to reduce the complexity of the tax code, notably by capping the State and Local Tax (SALT) deduction. Prior to tax reform, the tax code allowed taxpayers to deduct an unlimited amount of state and income and property taxes from their federal tax liability. As a result, many low-tax states were forced to subsidize the choices of high tax states.
 
This legislation, however, would reverse these positive alterations to the tax code by increasing the top marginal tax rate, lowering the threshold for which this rate kicks in, and scrapping the cap on the SALT deduction. Most concerningly, the effects of uncapping SALT would disproportionately benefit the wealthiest of our society. According to IRS data from tax year 2015, over 84 percent of the benefit of the SALT deduction went towards those with incomes above $100,000. A mere 3.5 percent went to those with income levels below $50,000. While some middle class taxpayers would see benefit from this change, nearly all the benefit would be for those at the very top of the income scale.
 
Ensuring all taxpayers keep more of their hard earned dollars was a priority of the TCJA, which is why only one percent of taxpayers paid more in tax under the reformed tax system. However, giving a tax break to the wealthiest among us, paid for by an increase in the tax liability of small businesses, is not a good use of taxpayer dollars. Many states have adopted pro-taxpayer reforms due to TCJA and the SALT cap, so we should not reverse course now.
 
Roll call votes on H.R. 5377 will be significantly-weighted in NTU’s annual Rating of Congress and a “NO” vote will be considered the pro-taxpayer position.