Why Is Sen. Schumer Suddenly Decrying High Tax Rates?

Why Is Sen. Schumer Suddenly Decrying High Tax Rates?
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Senate Minority Leader Charles Schumer, D-New York, recently stood in front of a home in a beautiful neighborhood in White Plains, NY, to decry -- of all things -- the area’s high local tax burden.

“We all know that one of the biggest burdens to live in this beautiful place -- it is beautiful and people want to live here -- it is high taxes,” said Schumer. “Westchester has the highest property taxes in the country and Rockland across the river is second. This was made worse by the tax bill that passed last year where the SALT deduction was greatly limited.”

He is referring to a provision in the federal Tax Cuts and Jobs Act enacted in 2017 that limited the State and Local Tax, or SALT, deduction. The measure capped this tax deduction at $10,000.

Schumer has introduced one of several proposals in Congress this session to either partially restore or fully repeal the SALT deduction.

With this proposal, he is really trying to change the subject. After all, it’s not Congress who increased the tax burden on the overburdened taxpayers in White Plains. It is their state lawmakers in Albany and their local government officials who did.

Prior to the cap, Empire State taxpayers were able to fully write off New York’s significant tax burden from their federal taxes. Now, those special interest benefits are capped at $10,000. Capping the SALT deduction is important because there is always a cost to special interest tax breaks.

As illustrated in a new Pacific Research Institute study, due to the SALT deduction, taxpayers in low tax states ultimately were socked with a higher tax burden to subsidize the high taxes in states like New York and California.

The study compared the average and marginal tax burdens paid by taxpayers in California representing a high tax state and Indiana representing a low-tax state. Before the SALT deduction cap was enacted, most taxpayers in Indiana had higher average federal tax rates than the taxpayers with the same income in California simply because California chooses to impose higher state and local taxes.

The primary reason politicians like Schumer representing high-tax states want to restore a higher SALT deduction is because it enables higher state taxes and spending by offloading costs onto taxpayers in low-tax states.

What Schumer actually wants is to preserve big state spending in Albany, not cut taxes for the homeowner at this press conference. Without a SALT deduction cap in place, taxpayers in New York or California never realized how much their state legislatures had increased state spending - or how much their taxes had been increased to pay for it. Big spending politicians could spend more than their constituents can afford knowing that they could fully deduct these expensive state taxes off their federal taxes.

Now, for the first time, New York taxpayers are experiencing the full pain of high taxes and spending because they can’t write it all off. By keeping the cap in place, this will hopefully inspire residents of New York and other high-tax states to demand spending and tax reform.

One benefit of capping the SALT deduction has been broad-based tax relief for tens of millions of Americans -- those living in both low and high-tax states. Based on the PRI study, taxpayers in every tax bracket except the super-rich saw their tax burdens decline thanks to the Tax Cut and Jobs Act.

By ending this unfair tax shift, taxpayers in Indiana may have seen a larger tax reduction than in California -- but the vast majority of taxpayers in both states had a lower tax burden.

Altogether, capping the SALT deduction helped set in place billions of dollars in broad-based tax relief for the entire nation.

Relaxing or repealing it to fuel the unsustainable tax and spending demands of liberal politicians like Schumer in high-tax states would be a great mistake and should be rejected.

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