Mitch McConnell and Donald Trump had only had one grand legislative “achievement” over their nearly four years together: the 2017 federal tax cut. They touted that cut as a glorious incentive for business that would boost investments in the real economy and increase annual incomes for average American families by a whopping $4,000.

What did McConnell and Trump actually “achieve” with their 2017 triumph? Not anything close to what they promised.

Those business investments never materialized. Corporate execs didn’t invest their new tax savings into jobs, a new Center for American Progress analysis relates. They spent 80 percent of those savings feathering their own nests with enrich-the-already-rich maneuvers like stock buybacks and higher dividends for shareholders.

And Americans working families didn’t gain any $4,000 in income from the 2017 tax legislation, notes a new look at IRS data by Pulitzer Prize-winning journalist David Cay Johnston. They lost income.

“The nearly 87 million taxpayers making less than $50,000,” notes Johnston, “had to get by in 2018 on $307 less per household than in 2016, the year before Trump took office.”

What about more middle-class households, families making between $50,000 and $100,000? Their taxes dipped on average by $143 in the year after the Trump tax cut passed. Taxpayers declaring between $500,000 and $1 million, by contrast, saw their tax bills drop an average $17,800.

The 2017 McConnell-Trump tax cut, in other words, has amounted to a giant giveaway to America’s rich, a giant step backward from the ideals of progressive taxation, the notion that tax rates should reflect ability to pay. Those of us with higher incomes, the progressive tax ethic holds, should pay taxes at higher rates than those of us with lower incomes.

Mitch McConnell and Donald Trump have never subscribed to this progressive ethic. But two analysts from the Brookings Institution, Richard Reeves and Christopher Pulliam, are arguing that the 2017 tax legislation that Donald Trump signed into law includes a “surprisingly progressive element”: a cap on the federal income tax deduction that American households can take for the state and local taxes — or SALT, for short — they annually pay.

This cap reduces to $10,000 the federal tax deduction for state and local tax payments, reducing to zero the federal tax benefit for every dollar of state or local tax a married couple pay in excess of that $10,000 threshold.

House speaker Nancy Pelosi and Senate minority leader Chuck Schumer both want to repeal this cap on the SALT deduction. Reeves and Pulliam consider this repeal move a sop to the rich. Have they got that right? Should progressives be defending the SALT cap in the 2017 McConnell-Trump tax act?

The quick answer: no. The longer answer: Reeves and Pulliam misunderstand two fundamental attributes of the 2017 cap on the SALT deduction. That cap just happens to be both unfair and bad tax policy.

First, the matter of fairness.

We constantly hear conservatives squeal about the unfairness of what they call “double taxation.” They’ve historically attached this label to the federal estate tax, the levy on the fortunes America’s rich leave behind at death. The typical estate, conservatives argue, includes earnings that have already faced income tax. So an estate tax, they conclude, amounts to wicked “double taxation.”

In fact, the estate tax doesn’t involve “double taxation.” But capping the deduction for state and local taxes does.

How so? We need a little background here. In the United States, we have a transactional tax system. We tax transactions. “Double taxation” only occurs when the same transaction gets subjected to two separate tax systems, with neither system recognizing the impact of the other. And that’s exactly what happens when we cap the deduction for state and local taxes.

Suppose, for instance, we have a taxpayer who pays $100,000 of tax to California on $1,000,000 of income, then has to pay federal tax on the same $1 million of income, with no reduction for the California tax paid. That taxpayer would then have paid federal tax on $100,000 of income from which this taxpayer never benefited. That would be a textbook example of “double taxation.”

Now compare a Californian who receives a $325,000 salary and pays $25,000 in state income tax, leaving this Californian with $300,000, to a Texan who receives a $300,000 salary and pays no state income tax, leaving this Texan with the same $300,000.

The Californian and the Texan would each have the same amount of income available to them, $300,000, when they sit down to do their federal taxes. But without a federal tax deduction for state taxes paid, the Californian would owe federal income tax on $325,000. The Texan would owe federal income tax on just $300,000. The Californian would end up paying more in federal income tax than the Texan. In what world would this be fair?

Let’s get deeper into these weeds. Texas currently funds a major share of the cost of public education in the state from the royalties Texas collects from oil and gas operations. These royalties flow into the Texas Permanent School Fund and the Texas Permanent University Fund. Over the years, these two funds have built up huge endowments. In 2017, the Texas Permanent School Fund sat on $41.4 billion. Annual income from those billions goes into Texas schools.

New York, by contrast, funds a major share of its public education system through a state income tax. New Yorkers, lacking the benefit of oil and gas royalty income, must fund the critical state function of public education directly out of their pockets.

But let’s finetune this analysis a bit more. What if those Texas oil and gas dollars that now go straight to public schools went straight to Texas taxpayers instead and those taxpayers then wrote checks, in the same total amount, back to the state to pay for Texas public education? The end result would be the same. Schools in Texas would be no better or worse off.

What does that tell us? In Texas, as in New York, funding for public schools comes from the incomes of state residents, directly in the case of New York, indirectly in Texas. The big difference: Texans don’t pay federal income tax on that imputed income of theirs that goes to the Texas Permanent School Fund to pay for public education. New Yorkers, with the SALT cap in effect, do pay federal taxes on the dollars they lay out for public schools.

Before the 2017 tax law, New Yorkers didn’t have to pay federal taxes on those school dollars, since they could deduct all their state income taxes on their federal tax returns. In other words, the SALT deduction put New Yorkers and Texans on a level playing field. But the capped SALT deduction we now have undoes that equal footing. Instead, some of New Yorker income that goes to fund public education has become subject to federal tax.

We could, of course, cap the SALT deduction and still treat New Yorkers and Texans the same if we started taxing Texans on their shares of the state’s oil and gas royalty income. But imagine the squealing we’d hear if that proposal ever gained traction!

Politicians from low-tax states like Texas would much rather do their squealing about the limited SALT deduction taxpayers in higher-tax states can still take. They contend that that any SALT deduction amounts to a federal subsidy for spendthrift blue states.

The data entirely contradict this canard. Blue states generally pay more into the federal government than they receive, red states less, a reality that shouldn’t surprise us. States that put higher taxes into effect use the resulting tax dollars to hire and pay state workers. These workers, in turn, pay both federal income and employment tax. And that makes the SALT deduction mostly a wash from the federal government’s perspective.

Critics of the SALT deduction have a response to all this. Yes, the cap on the SALT deduction in the 2017 tax law may be somewhat unfair, but mainly rich people feel the unfairness. If they can only deduct $10,000 of the $50,000 they pay in state and local taxes, they have to pay more in federal taxes. No big deal. They don’t pay enough in federal taxes anyway. So why care?

We need to care because in the end rich people won’t pay the real cost of limiting the SALT deduction. State and local governments will. And that makes a SALT deduction cap just bad tax policy.

Congress, we need to remember, has played around before with moves that diminish the federal tax benefit that comes from paying state and local taxes.

In 2001, for instance, the Bush tax cuts included a provision that changed the federal tax treatment of state estate and inheritance taxes. Previously, the estate and inheritance taxes states collected could be taken as a credit off any federal estate tax due. The 2001 Bush tax cuts changed this credit to a deduction. The right to deduct state estate or inheritance tax has some value to a rich person’s heirs, but not nearly as much as a credit. By the logic of critics of the SALT deduction, this switch from credit to deduction in the Bush-Cheney tax package rated as “progressive.”

But this switch didn’t turn out progressive at all. Before the change, the great majority of states imposed estate or inheritance taxes, most frequently at a rate that matched the schedule for the federal credit. The federal credit allowed state residents to recover 100 percent of the state estate and inheritance tax paid, as long as the state tax rate did not exceed 16 percent. With this credit in place, states had no reason not to levy an estate or inheritance tax. Today, only 17 states and the District of Columbia have either of these taxes.

Back then, in 2001, the top federal estate tax rate stood at 55 percent. After allowing for the 16 percent credit for state-level estate tax, that left 39 percent for the federal government.

Compare that to today. The current top federal estate tax rate stands at 40 percent, which means the net tax rate to the federal government actually has increased in those states that have abandoned estate and inheritance tax. But the real winners have been the heirs of wealthy residents in these states. They’ve seen their maximum combined federal and state estate tax rate drop from 55 to 40 percent. Progressive, huh?

Top state income tax rates also have declined substantially in recent decades. Why? Because the devaluation of the federal tax benefit for paying state tax makes the wealthy residents of a state more sensitive to their state’s tax policy. That opens the door for right-wing groups like the American Legislative Exchange Council to lobby state legislatures for rate reductions.

The right-wingers talk about “tax competition,” But in real life what we have here has become a race to the bottom. Each state lowers its tax rate to attract wealthy individuals. Little net movement eventually results from this competition, but rich people throughout the nation end up paying less in state taxes and states see their revenue bases decimated.

You can also draw a straight line from the devaluation of state tax payments for federal tax purposes to problems with over-policing. The more state revenue bases contract, the less revenue states have to share with cities and towns. All too often, cities and towns try to make up for the lost revenue by stepping up enforcement of minor traffic violations and petty offenses.

The U.S. Department of Justice, in its investigation of the law enforcement practices in Ferguson, Missouri in the wake of Michael Brown’s death, found an over-reliance on revenue from petty fines. Police stopped Michael Brown, you may recall, for jaywalking.

States and localities that have had to make do with less revenue have found themselves forced to cut services. All except one: law enforcement. The reason for that: Oppressive law enforcement turns out to be a cheaper means of social control than providing decent public support services. States and cities that hack away at budgets for social services typically beef up law enforcement. In the short-term, a beneficial budget trade-off. In the longer term, anything but.

The bottom line: Capping the SALT deduction has been unfair and contributed to atrociously bad federal tax policy. Some might consider that progressive. We don’t.

Bob Lord, an Institute for Policy Studies associate fellow, practices tax law in Phoenix. Sam Pizzigati, also an Institute associate fellow, co-edits His most recent book: The Case for a Maximum Wage.

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