Rep. Walden rubs SALT on the tax plan wound

Blog post
November 29, 2017By Daniel Hauser

When the U.S. House of Representatives voted on its version of the Trump tax plan on November 16, 13 Republican Representatives said “no.” For all but one of them, the tax plan’s gutting of the State and Local Tax (SALT) deduction was a deciding factor.

Oregon Representative Greg Walden voted in favor of the bill, even though the proposed changes to the SALT deduction would hit Oregon taxpayers — including many in his district — harder than folks in most other states.

You’ve probably heard by now that the tax plan being devised by President Trump and his Republican colleagues would shower the rich with tax cuts. To help pay for those tax cuts, they propose eliminating the SALT deduction, or at least a portion of it. Currently, the SALT deduction allows taxpayers who itemize deductions on their federal income taxes to deduct state and local property, income, and sales taxes. The House GOP plan would fully repeal the ability to deduct state income taxes from federal tax returns, and limit the deduction of property taxes to $10,000. The most recent version of the Senate GOP plan would completely repeal the SALT deduction, including the deduction of all property taxes.

Now, it’s true the SALT deduction mainly benefits taxpayers on the upper end of the income ladder. So all else being equal, eliminating it would make the tax code more progressive.

But that’s not the full story. As the Center on Budget and Policy Priorities (CBPP) notes, the Republican plans “would replace the deduction with tax cuts that are, on net, even more tilted to the top.”. For the very rich, the other ingredients of the tax plan more than offset the loss of the SALT.

More unsavory still, eliminating the SALT deduction would undermine efforts for state and local governments to raise their own tax revenue and could lead to cuts in existing services. The SALT deduction helps state and local governments raise revenue to fund their services by offsetting some of the cost on middle- and high-income taxpayers.

It is particularly helpful here in Oregon, which has one of the nation’s least regressive tax structures. While lower income Oregonians devote a larger share of their income toward state and local taxes than do high-income Oregonians compared to the rich in most other states, high-income Oregonians contribute more proportionally. That makes use of the SALT more prevalent in Oregon than in most other states.

Indeed, Oregonians were more likely than taxpayers in all but five other states to use the SALT deduction on their 2015 taxes. In fact, one in three Oregon taxpayers used the SALT deduction to reduce their taxable income by an average of $12,600. In Rep. Walden’s house district, just under one in three taxpayers use this deduction to reduce their taxable income by an average of $10,000. Together, Oregonians deduct $8.5 billion in state and local taxes from their federal tax returns. (Note: this is the amount deducted from taxable income — not the amount of tax savings.)

“Without that deduction,” the CBPP explains, “taxpayers would be less likely to support current state and local tax levels. As a result, states and localities would likely struggle even more than they do now to raise adequate revenue.”

And such a result is part of the underlying strategy. Oregon Republican Party spokesman Kevin Hoar acknowledges that elimination of the SALT “incentivizes states to reduce its own taxes.”

At a time when Oregon schools suffer from decades of underfunding, when college tuition has been rising faster than wages, when Oregon is far from ensuring every child attends preschool, when housing affordability is a crisis for Oregonians in all corners of the state, and when the state’s poverty reduction programs suffer from decades of neglect, pressuring state and local governments to cut taxes is the last thing we should do. To the contrary, we should be looking for more revenue to invest in Oregonians.

Without question, the Trump tax plan would harm the nation. And for Oregonians, the repeal of the SALT deduction rubs salt on the wound.

Rep. Walden still has time to make the right decision, and vote against this tax proposal that favors the rich over all other Oregonians. Click here to contact Rep. Walden and tell him to do right by Oregonians.