The Corner

Politics & Policy

SALT in the Wounds

President Trump with Republican lawmakers after passage of the Tax Cuts and Jobs Act legislation, December 20, 2017. (Jonathan Ernst/Reuters)

Well . . .

The New York Times:

President Trump’s $1.5 trillion tax cut was supposed to be a big selling point for congressional Republicans in the midterm elections. Instead, it appears to have done more to hurt than help Republicans in high-tax districts across California, New Jersey, Virginia and other states.

House Republicans suffered heavy Election Day losses in districts where large concentrations of taxpayers claim a popular tax break — the state and local tax deduction — which the law capped at $10,000 per household. The new limit resulted in an effective tax increase for high-earning residents of high-tax states who claim more than $10,000 per year in SALT.

Democrats swept four Republican-held districts in Orange County, Calif., where at least 40 percent of taxpayers claim the SALT tax break, defeating a pair of Republican incumbents and winning seats vacated by Representatives Ed Royce and Darrell Issa. Those districts include longtime Republican strongholds, like Newport Beach, and rank among the country’s largest users of the state and local tax break….

“The state and local tax deduction being capped at $10,000 hurt a lot of people in our district and our state,” Mike Levin, a Democrat who won an open seat that was previously held by Mr. Issa, said in an interview shortly before the election.

The SALT cap may not have been the primary motivation for voters in choosing Democratic candidates. But a review of polling data over the past year suggests that the limit has some key Republican constituencies feeling bittersweet about the new law — and more willing to back Democrats in House elections.

This was, I am afraid, all too predictable (and was, ahem, predicted).

Beyond the longer-term economic damage that the reduction in the SALT deduction may lead to, and beyond the remarkable short-sightedness of hacking back an “untouchable” tax “break” in an era when tax increases will, sooner or later, be on Washington’s agenda, it was also a serious — and obvious — political mistake.

The most politically effective tax cuts are those that are easiest to understand. Shrinking the SALT deduction not only eliminated (or substantially reduced) the tax savings for some voters, but also, I would guess, muddied the perception of those cuts, even among taxpayers who ended up as net winners from them.

They also gave the impression that the GOP was “punishing” blue states, and, more specifically, their more affluent urban and suburban residents. This constituency has been slipping away from the GOP for some time for a mix of social and cultural reasons. Many of those who stuck with the party did so because they at least trusted Republicans to defend them from the IRS. Capping the SALT deduction was a breach of that trust. The result, it seems, contributed to the loss of a number of seats that Republicans could not afford to lose. Those losses were made all the more damaging by their geographical concentration. There is a certain “herding” in voting patterns, and once final redoubts  (which are, incidentally, also potential beachheads) fall, they are very hard to win back.

I hope Paul Ryan thought it was worth it.

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