On the menu today: The “big beautiful bill” is probably going to end up giving Americans a more complicated tax code instead of a simpler one; the most recent update on what President Trump’s promise to “get SALT back” means; the U.S. Senate suddenly loves the idea of eliminating taxes on tips; and why you could argue that Donald Trump is the one man who the American public can be certain didn’t kill Jeffrey Epstein. Read on.
Tax Code Fights
For a long stretch, just about every Republican with presidential ambitions wanted not just tax cuts, but a simpler, fairer tax system to go along with those cuts. Sometimes GOP officials would embrace a flat tax or Herman Cain’s “nine nine nine,” often they just wanted a “flatter” tax code with fewer income tax brackets. In fact, for decades, a broad bipartisan consensus agreed that the U.S. tax code is too complicated, with too many exceptions, carve-outs, deductions, and loopholes.
Back in 2009, New York University Law School professor Deborah Schenk contended that the U.S. tax code was so complex that almost no American could file a tax return without making at least one mistake. Those mistakes sometimes result in the taxpayer paying less than what they owe — bad news for the finances of our government — but the number of overlooked tax deductions and credits means lots of Americans pay more than what they owe. (For example, if you drove to do volunteer work, you can deduct the actual cost of gasoline or 14 cents per mile. Losses from gambling, including casinos, scratch-off lottery tickets, and sports betting are deductible.)
The Tax Cuts and Jobs Act of 2017 — usually referred to as “the Trump tax cuts” — attempted to simplify the tax code by increasing the standard deduction and encouraging taxpayers to use that instead of itemizing their deductions, and by raising the threshold for the alternative minimum tax. As the Tax Foundation notes, the effect was dramatic:
The TCJA’s effect on complexity is clear. In 2017, 46.8 million tax returns claimed itemized deductions, translating to 30.6 percent of individual tax returns. Following tax reform in 2018, only 17.5 million individual tax returns claimed itemized deductions, or 11.4 percent. The share of taxpayers itemizing has hovered around 10 percent since, after staying relatively steady near 30 percent of returns in previous decades.
The Tax Cuts and Jobs Act also put a $10,000 cap on how much individuals could deduct from their taxable income in paid state and local taxes ($5,000 if married, filing separately). Republicans had been pushing for this change for years, contending the unlimited deduction for state and local taxes amounted to a federal tax code subsidy for high-tax blue states, and taxpayers in red, GOP-leaning states with lower state and local tax rates didn’t see much benefit from it.
The states with the lowest cumulative tax burden are Alaska, New Hampshire, Wyoming, Florida, and Tennessee; the states with the highest are New York, Hawaii, Vermont, Maine, and California.
(In the years after the TCJA passed, you saw a lot of progressives on social media insisting that Donald Trump had raised their taxes. It was conceivably true, but that would require them to have previously deducted a massive amount in state and local taxes, an amount above $10,000 so large that it exceeded the reduction in income tax rates passed under TCJA. The Tax Policy Center calculated that 5 percent of taxpayers paid more in 2018 than they did under the previous tax laws.)
But by 2024, President Trump was really mad at the guy who had signed the SALT deduction cap into law. “I will turn it around, get SALT back, lower your Taxes, and so much more!” Republican nominee Donald Trump declared on Truth Social during the campaign.
But there’s considerable disagreement on what “getting SALT back” means.
The U.S. House of Representatives currently has 220 Republicans, 213 Democrats, and two vacancies. Passing the “big beautiful bill” that would include the extension of the Trump tax cuts and other changes to the tax code will require near-unanimity from House Republicans, including the seven Republicans from New York, nine from California, and three from New Jersey.
New York Republican Representative Mike Lawler and the caucus of blue-state Republicans are hell-bent on raising the deduction for state and local taxes as much as possible, recently demanding that the SALT cap be expanded to $62,000 for single filers and $124,000 for joint filers. As the Editors of NR note in an editorial spitting hot fire at the “SALT caucus,” that proposal would cost more than every other new idea in the bill put together.
(As I wrote over in that other Washington publication in January, “If Republicans had won a larger House majority in the 2024 elections, they likely would have had enough votes to leave the SALT cap as it was.”)
House Speaker Mike Johnson and a group of blue-state Republicans have reached a critical but tentative deal to boost the cap on state and local tax deductions to $40,000 in the GOP megabill, according to three Republicans with direct knowledge of the private agreement.
The new deduction cap, which would be per household, will be limited to taxpayers making below $500,000. Under the tentative deal, the income cap and the deduction will grow 1 percent every year over a ten-year window. The deduction stays in place after the 10-year window and doesn’t snap back to previous levels.
The “big beautiful bill” currently working its way through Congress does not look like it is going to simplify the tax code. The Senate passed the No Tax on Tips Act in a unanimous vote Tuesday, which makes that a likely piece of this year’s tax changes. Under the Senate’s version of the proposal, only workers making less than $160,000 would be eligible for the exemption, and it would apply to $25,000 in tips, and the bill declares it only applies to “an occupation which traditionally and customarily received tips on or before December 31, 2023.”
That provision is an attempt to prevent efforts to define traditional income as “tips” that would become tax-free.
If you thought there were tip jars everywhere now, just wait until tips become untaxable income.
ADDENDUM: A quick update to Monday’s edition of the newsletter, which contended, “If there were any two figures who would be intensely motivated to investigate and prove a plot by some sort of powerful figure (particularly on the Democratic side of the political spectrum) to murder Jeffrey Epstein in his cell and make it look like a suicide, FBI Director Kash Patel and Deputy Director Dan Bongino are the guys. They apparently have examined the existing case files and concluded there is no evidence, or anything that warrants further investigation.”
A few readers countered that if the evidence pointed to Donald Trump having a role in Epstein’s death, Patel and Bongino would be strongly motivated to cover it up.
So let me get this straight: Under this theory, Donald Trump and/or his associates conspired to kill Jeffrey Epstein.
And in more than four years of Trump being investigated in just about every way possible by Manhattan DA Alvin Bragg, New York State AG Tish James, special counsel Jack Smith, the entire U.S. Department of Justice under former AG Merrick Garland, and Fulton County DA Fani Willis . . . not a single law enforcement investigator ever found anything pointing to this plot to kill Epstein? Or is the theory that the investigators did find something, but those prosecutors chose to not pursue charges?
None of them felt good about securing a conviction of conspiracy to commit murder against Trump with a Manhattan jury?
Instead of going after Trump on what would have been one of the most notorious crimes in New York City history, Bragg went with the falsified business records charge?
Okay.
If you ask me, in this light, Donald Trump is the one guy we can be certain didn’t kill Jeffrey Epstein.