Trump Revisits State and Local Tax Deduction

Plus, Bernie Sanders moves to halt arms sales to Israel

Trump campaigning in the Bronx earlier this year.

In December of 2020, after Trump lost the election, I wrote a “Why Trump Lost” column that included a paragraph about taxes: “Mr. Trump ran for re-election on a vague promise of additional tax-cutting, but his corporate tax cuts were paid for in part by a capping of the individual deduction for state and local taxes. That rubbed ‘SALT’ in the wounds of voters in such places as the high-property-tax suburbs of Philadelphia, suburban Atlanta, Arizona.”

Now Trump looks to be revisiting that policy, touting an event on New York’s Long Island: “I will turn it around, get SALT back, lower your Taxes.” At the event tonight, he said, “I will cut taxes for families, small businesses and workers, including restoring the SALT deduction, saving thousands of dollars for residents of New York, Pennsylvania, New Jersey, and other high cost states.”

An October 19, 2005 editorial in the New York Sun backed an end to the federal tax deduction for state and local taxes. The Sun said then, “Certainly an end to the federal deduction will cause New Yorkers to feel more acutely the burden of their state and local taxes, which are among the highest in the nation. But such pain – and the heightened competition between jurisdictions that will come with the elimination of the deduction – can only increase political pressure on state and local government in New York to reduce spending and taxes. As it is, the state and local tax deduction creates a perverse incentive that actually encourages states and cities to increase taxes on the theory that otherwise the money will just end up in Washington.”

The 2017 Trump tax law imposed a $10,000 cap on the deduction. Eventually the New York Times editorial board, which had long favored the deduction, came around, in 2021, to the idea of eliminating it entirely: “The primary beneficiaries are the wealthy people who get a tax break.”

With Trump now backing elimination of taxes on tips, an end to taxes on Social Security benefits collected by senior citizens, and, apparently, restoring the state and local tax deduction, tax policy would move away from simplification and toward complexity. Steve Forbes, a formidable Republican voice on economic policy, observes that Trump might be better off just backing a flat tax.

As tax policy, the deduction for state and local taxes doesn’t have much logic. 

As politics, though, it has an appeal for Trump, because it might help him with some homeowners and high-income earners who have seen their state and local tax bills soar in recent years while the $10,000 cap remains fixed. 

Some raise concerns about the deficit. But Vice President Harris is out campaigning on her promises to “cut taxes for working families,” offset by new taxes on unrealized capital gains of millionaires and billionaires that may never be enacted. So why shouldn’t Trump offer up his own tax cuts, offset by promises of new tariff revenues that also may not materialize?

It’s better to have the candidates competing over who will be a tax-cutter than over who will do better at increasing taxes. It creates a political context that might eventually allow a President Trump to win over some Democratic members of Congress to his tax legislation, because the Democratic lawmakers have constituents who pay high property and income taxes and who would like relief. And it shows in Trump a healthy ability to learn from and correct an earlier mistake. One can argue the tax-policy fine points and principles. But the politics of Trump trying to deliver not only for voters in low-tax places but also for people in Long Island and Pennsylvania and New Jersey are a sign that for all the fears and talk of Trump’s tyrannical tendencies, he’s deeply engaged right now in the interest-group, constituency-pleasing appeals that are at the heart of democracy. For an autocratic authoritarian, Trump sure is devoted to winning over suburban swing voters. That doesn’t mean he’ll follow through once elected. But there is something about the heat of a presidential campaign that has a way of focusing a candidate’s attention on what voters care about. It might make for less-than-textbook technocratic tax policy, but there’s something to be said for responding to the people, too.

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