Buttigieg proposes undoing SALT deduction cap

Democratic presidential candidate Pete Buttigieg on Monday called for undoing a provision in President Trump’s tax-cut law disliked by many residents of high-tax states, ahead of the Super Tuesday primaries that include California.

Buttigieg, the former mayor of South Bend, Ind., is proposing removing the $10,000 cap on the state and local tax (SALT) deduction for households earning less than $400,000.

“Removing the SALT cap for families undoes Trump’s politically motivated tax increase and enables governors and mayors across the country to enact progressive tax policies,” Buttigieg’s campaign said in a news release.

Republicans included the SALT deduction cap in their 2017 tax law in order to raise revenue to pay for tax cuts elsewhere in the bill, and to put a limit on the federal tax code subsidizing higher state taxes. They have noted that most taxpayers, even in high-tax states, are gettin a tax cut under the 2017 law.

But the SALT deduction cap is unpopular among politicians in high-tax, Democratic-leaning states such as New York, New Jersey and California, who argue that it unfairly punishes their residents and makes it harder for states to provide robust public services. In California, one of a number of states holding their presidential primaries on March 3, Democrats won several GOP-held House districts in 2018 where taxpayers had previously relied on the SALT deduction.

The SALT deduction issue has been more prominent in Congress than it has been on the campaign trail, where Democratic presidential candidates have spoken more about their plans to raise taxes on the rich and corporations. Democrats face challenges in repealing the SALT deduction cap because analysts have estimated that high-income taxpayers would benefit the most from repeal. 

Democratic presidential candidates have not all taken the same position on the SALT deduction cap, and some candidates’ positions are not clear.

Former Vice President Joe Biden has expressed support for repealing the SALT deduction cap, while former New York City Mayor Michael Bloomberg supports keeping the SALT deduction cap, according to news reports.

Sen. Amy Klobuchar (D-Minn.) last year voted in the Senate to disapprove of regulations related to the SALT deduction cap, while Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) were not present when the vote took place.

Buttigieg also said that he wants to expand the earned income tax credit and the child tax credit — two tax credits that benefit low- and middle-income households. His proposed enhancements to the child tax credit include making the current $2,000 credit fully refundable and creating an additional $1,000 refundable credit for families with children under the age of 6.

There is widespread support among Democrats in Congress and on the campaign trail to expand the earned income tax credit and child tax credit.

The proposals Buttigieg floated Monday come on top of other tax proposals the candidate has offered to increase taxes on the wealthy and corporations, including a financial transaction tax and raising the corporate tax rate from 21 percent to its pre-GOP tax law level of 35 percent. Buttigieg’s campaign said Monday that the candidate would tax U.S. companies’ foreign earnings on a country-by-country basis at a rate of 28 to 35 percent.