Meet the “Moderates” Trying to Make Trump’s Tax Bill More Regressive
In the distant past, Republican moderates were people like Senators Pete Domenici of New Mexico and Bob Packwood of Oregon who preached fiscal responsibility and were reasonably tolerant of the welfare state. Today, Republican moderates are people like Senator Ron Johnson of Wisconsin and Representative Mike Lawler of New York who will gladly accept a $4.2 trillion tax cut, most of which benefits households earning $217,000 or more (according to the nonprofit Tax Policy Center), plus Medicaid cuts projected, conservatively, to kill 51,000 people (according to the Yale School of Public Health).
All Johnson, Lawler, and other Republican moderates ask in return is to expand the budget deficit (which is already more than doubled under the bill) by another half-trillion or so in order to kill off the only progressive component to Trump’s 2017 tax law. With moderates like these, who needs extremists?
What Republican moderates seek to reinstate, as much as they possibly can, is the deduction on federal tax returns for state and local tax payments, also known as SALT. Before 2018, these tax payments were fully deductible. The 2017 tax law capped the deductible amount at $10,000. This change was progressive because most of the people who paid $10,000 or more in state and local taxes were in the top 1 percent of the nation’s income distribution, and nearly all of them were in the top 5 percent. For the vast majority of Americans below the 95th income percentile, state and local taxes remained fully deductible.
Full SALT deductibility was ended to partially offset the cost of the 2017 tax bill’s giveaways to corporations and wealthy individuals. In effect, the law traded in one regressive tax break (SALT) in exchange for several other much costlier regressive tax breaks (top corporate tax rate lowered from 35 percent to 21 percent; top marginal income tax rate lowered from 39.6 percent to 37 percent; and a 20 percent “pass through” deduction for business owners).
