SALT Repeal: Illustrated
Alex Brill | AEIdeas
The SALT deduction is the largest itemized deduction and one of the largest tax expenditures in the entire tax code. I estimate that its repeal would raise $1.4 trillion in new revenue over a decade. In the piece for The Hill, I calculated how to “recycle” that $1.4 trillion in a distributionally neutral manner by lowering tax rates and increasing the standard deduction. The reforms being proposed by Republican lawmakers are somewhat larger than the reform I illustrate, but the exercise was intended mostly to demonstrate two things:
- Repealing a really large deduction that primarily benefits higher income earners can finance big rate cuts, including a reduction of the top rate to 35%; cut taxes for tens of millions of taxpayers; simplify the tax code considerably; and maintain the progressivity of the tax code.
- The GOP’s tax reform agenda, at least with respect to individual tax reform, can easily be accomplished without busting the budget.