Congressman Jim Jordan really wants to be the next Speaker of the House. In his desperation to win over support for his speaker bid, the Ohio Republican has reportedly made a promise that completely compromises his fiscally conservative principles.
“Speaker candidate Jim Jordan (R-Ohio) told moderate New York holdouts he would support doubling the state-and-local tax deduction cap to $20,000,” Bloomberg reports, referring to a provision of the federal tax code, the “SALT” deduction, that gives people with high state and local taxes a discount on their share of federal taxes. Most fiscally conservative Republicans oppose expanding the SALT deduction, as Jordan is reportedly considering, but a handful of Republican lawmakers from specific states with high taxes are fighting for it to be expanded because it would help their constituents.
Their personal interests aside, it’s a terrible idea and a compromise not worth making. The SALT deduction is a crony tax loophole that should not exist at all, let alone be expanded. Why?
Well, for one, it is fundamentally unfair. If states and localities want to have high benefits and high taxes locally, that’s their right. But they have no right to then get a discount on their share of the federal tax burden. Are we really supposed to believe that they are somehow less responsible for their share of funding the US military because their state chooses to offer more welfare to its residents? That’s the “logic” of the SALT deduction.
Secondly, it overwhelmingly benefits the affluent. The nonpartisan Tax Foundation has modeled this proposed expansion and finds that it almost exclusively helps those earning more than $100,000 annually, with the biggest benefits going to those who earn $250,000 to $1,000,000 annually. And it would cost taxpayers $54 billion over a decade that would inherently have to be made up elsewhere via more taxes elsewhere, more debt hurting all Americans, or more money-printing that fuels inflation.
The third big issue with the SALT deduction is that it subsidizes the growth of government.
Some tax deductions, like the charitable tax deduction, are meant to subsidize something good: like charitable donations. However, the SALT deduction actually encourages the expansion of the welfare state, because it allows states that pass additional benefits that will exclusively be enjoyed locally to pass off the cost of those benefits, in part, to taxpayers in other states. And it’s easy to support extra programs in your state when you don’t have to bear the full cost!
For all these reasons, expanding SALT is a terrible—and remarkably un-conservative—idea. Jim Jordan needs to decide what’s more important to him: advancing his political career—or the principles he has built it on.