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:

  1. 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.
  2. The GOP’s tax reform agenda, at least with respect to individual tax reform, can easily be accomplished without busting the budget.

Read Here