Dragons are hard to kill. Just ask the Lannister clan. We should now add the GOP to our list of failed dragonslayers, albeit they’ve staggered the beast. But is this write-off wielding, deduction breathing tax dragon known as the State and Local Tax Deduction (SALT) friend or foe? In defending certain provisions of the Tax Cuts and Jobs Act (TCJA) we’ve heard much chatter from conservatives about Red states subsidizing Blue states. This argument was used as de facto justification for capping SALT at $10,000 per year. The cap an apparent appeasement to Blue state Republicans who vigorously resisted an outright kill. It’s a provocative charge, that Republican leaning states are somehow supporting their Democratic neighbors. Could it be true? It’s one thing to throw such a haymaker, quite another to land it.
One knock on SALT is its regressive nature as a tax scheme. As income rises, the rate at which one is taxed falls. SALT opponents say this feature makes it unfair by shifting a higher tax rate onto lower income individuals, while the more well-heeled are taxed at the more desirable lesser rate. Remember, we are talking tax rates and not tax burdens. As such, this doesn’t necessarily mean the overall amount owed by persons of lesser income will be greater. We speak proportionality here. More