How SALT Pits the Rich vs. Poor in New York

The big, beautiful tax bill sets back tax policy by a decade, and it facilitates the continuation of reverse tax redistribution

Letter to The WSJ. 

"In your editorial “The GOP’s SALT Deal Folly” (May 22), you rightly criticize House Republicans from New York for securing an increase in the state-and-local tax deduction. The giveaway, you note, will subsidize “profligate Democratic-run states.” But SALT isn’t merely a red vs. blue issue; it also pits the poor against the rich. New York is a perfect example.

Internal Revenue Service data for 2022 shows that New York is home to five of the top 50 congressional districts with the most taxpayers affected by SALT. Rep. Mike Lawler’s district ranks 29th, and Rep. Nick LaLota’s 39th. But New York also has four poor districts that have among the fewest taxpayers affected by SALT. Ranking 422nd is Rep. Ritchie Torres’s district in the Bronx, which had an average income of $36,265 in 2022. The average income in Mr. Lawler’s district was $144,270.

Since virtually all taxpayers in such poor districts claim the standard deduction, they are effectively paying full freight for their state and local taxes. This is in contrast to the wealthy taxpayers in suburban districts who would now be able to shift up to $40,000 of their local property taxes and state income taxes to Uncle Sam—up from the current $10,000.

Matthew S. Johnson and Gladriel Shobe illustrate this sort of reverse subsidization in a new study, “Geographic Inequality and the SALT Deduction.” They find that wealthy enclaves can use high property taxes and the SALT deduction to discourage demographic groups from moving into their neighborhoods, and they can afford more expensive amenities—e.g., better schools and parks—because part of the cost is written off on their 1040 tax returns.

The big, beautiful tax bill sets back tax policy by a decade, and it facilitates the continuation of reverse tax redistribution from the poor to the rich. The Senate should correct this folly and set the SALT deduction where it belongs: zero.

Scott Hodge

Arnold Ventures

Washington"