Nancy Pelosi's idea to retroactively lift the limit on state and local tax deductions would be almost useless for people who need the most help

Tom Brenner/ReutersHouse Speaker Nancy Pelosi, Democrat of California.
  • Pelosi is calling for another economic relief package to get more equipment for embattled healthcare workers, as well as relief for households.
  • The House speaker said one measure under consideration is retroactively repealing the SALT cap, which puts a $US10,000 limit on the amount of state and local tax deductions that households can claim each year on their tax bill.
  • But that measure would disproportionately benefit richer households, and leave out the vast majority of middle-class ones from getting any money.
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The ink has barely dried on the $US2 trillion economic relief package President Trump signed into law on Friday. But Democrats are already eyeing “Phase Four” stimulus legislation to shore up an economy that’s been severely battered by the coronavirus pandemic, underscoring the severity of the crisis.

House Speaker Nancy Pelosi is leading the charge. In an interview with The New York Times published Monday, she called to purchase more equipment for healthcare workers, buoy pensions and medical leave, and strengthen efforts to ensure the federal government covers medical treatment for the coronavirus.

She also said she wanted to get more money flowing to households and ramp up their spending.

Another idea she floated was retroactively rolling back the state and local tax deduction – popularly known as SALT – Republicans enacted in their 2017 tax law. It’s a limit that bars households from deducting more than $US10,000 a year from their yearly tax bill.

Pelosi said the change could be made for people who filed their 2018 and 2019 taxes, allowing them to get more money back from the federal government.

“They’d have more disposable income, which is the lifeblood of our economy, a consumer economy that we are,” the California Democrat said.

Yet that measure would do almost nothing for most people catching the economic brunt of the virus’ fallout, like hourly workers. Instead, the tax cut would shower wealthier households with additional cash to spend.

The Committee for a Responsible Federal Budget found in an analysis last year that repealing the SALT cap would primarily benefit millionaires with a tax cut of nearly $US60,000 per year.

“This is a HUGE windfall for the very rich. And as its retroactive, it will literally do NOTHING to help states – even indirectly,” said Marc Goldwein, head of policy at the nonpartisan Committee for a Responsible Federal Budget, in a tweet.

The CRFB chart below illustrates the stark disparity between the richer households drawing the lion’s share of the benefits and everyone else.

Households earning between $US500,000 and $US1 million would get around $US10,682 back from the federal government, a tidy sum. But those making $US100,000 and below would see virtually no benefit at all.

Other studies on its possible impact also suggest the aid skews heavily towards richer taxpayers. The nonpartisan Tax Policy Centre estimates that fewer than 3% of households in the middle quintile of taxpayers would receive any benefit under it.

It’s not immediately clear whether other Democrats would sign onto the effort to repeal SALT – and or if the repeal has a shot at becoming reality. There’s long been concern among Democrats about the limit’s impact on wealthier households in high-tax states like New York and California.


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Republicans are pushing back on proposals for another economic stimulus package for now. Still, Pelosi may intend to amend the SALT rule in another way.

“To be clear, action on SALT would be tailored to focus the benefits on middle class earners and include limitations on the high-end,” Pelosi spokesperson Henry Connelly said on Twitter.

The economic relief package carried significant benefits for Americans, particularly provisions to significantly increase unemployment benefits and send $US1,200 checks to individuals plus an extra $US500 for each child they have aged 17 and under.

But experts say repealing SALT wouldn’t do much to help stimulate the economy overall, as wealthier people tend to save their money.

“It doesn’t strike me as the most effective way of targeting economic stimulus,” Seth Hanlon, a tax expert and senior fellow at the Centre for American Progress, told The Times.

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