Two weeks ago, I voted against the House’s irresponsible plan which would raise taxes on up to 38 million working families. That plan passed the House, but now the fight for tax reform moves to the Senate, where the Republican leadership, led by Mitch McConnell, has put forth a tax plan that would completely eliminate the state and local tax (SALT) deduction. This would mean a significant tax increase for working families. For example, the SALT deduction allows families in Cook County to lower their taxable income by an average of $4,100 per year. Kane County families save an average of $5,000. In DuPage, the savings are $6,600.
It’s important to note that repealing SALT doesn’t just affect residents of so-called “high tax” states like Illinois; in 2015, 40 percent of all U.S. households earning $50,000 to $75,000 claimed this deduction. In addition, 85 percent of all itemizers are able to deduct their property taxes through the SALT deduction.
Repealing SALT amounts to “double-taxation,” since taxpayers would have to start paying federal taxes on the tax money they pay to their state and local governments. That’s why the SALT deduction predates the creation of the federal income tax in 1913. The Revenue Act of 1862, levied to finance the Civil War, allowed taxpayers to deduct local taxes from their federal tax burden. For more than a century, it has prevented the double-taxation of working families under the federal tax code.
Why repeal a federal tax deduction with such a long history of benefiting working families? Because it would raise an estimated $1.3 trillion dollars, which President Trump and congressional leaders intend to put toward new tax breaks for special interests.
I believe the benefits of tax reform should flow to those who most need them most – hard-pressed working families struggling to reach or stay in the middle class. Such reforms could include expanding tax credits for college tuition and for childcare expenses to more working families; reducing taxes on small and start-up businesses that create most of the new jobs in our country; and closing the many loopholes and special privileges that allow special interests to avoid paying their fair share of taxes.
The last thing Congress should do in the current economic climate is to repeal deductions like SALT that benefit middle-class families who lack the lawyers and lobbyists to manipulate the tax code to their benefit.
Many leading bipartisan and nonpartisan organizations have gone on the record for retaining the SALT deduction. These include: the National Governors Association, the United States Conference of Mayors, the National Conference of State Legislatures, the National Association of Counties, and the Council of State Governments. I recently wrote to Illinois Governor Bruce Rauner, asking him to add his voice to those fighting to preserve this essential tax deduction for millions of Illinois families. Unfortunately, the Governor has chosen not to take a position — despite the millions of dollars repealing SALT would cost Illinoisans in additional taxes.
There is no question that our current federal tax code needs serious reform. But adding to the existing tax burden on the middle class by repealing the SALT deduction is a big step in the wrong direction.