Wait right there. Ending tax deductions and credits means someone's taxes are going up. Whose? Why? And won't that create opposition to the entire reform? The answer is no, not in the context of the rate reduction and all other positive changes included in the tax framework put forth by the White House and Republican leadership in Congress.
Eliminating the state and local tax deduction and doing nothing else would certainly be a tax increase. However, repealing it as a trade-off to get all the rate reduction and other desperately needed changes included in the GOP tax plan is a great deal for U.S. taxpayers. The gross domestic product-boosting features of the framework will soon be put into legislative language.
We believe that the GOP's plan will cause the corporate tax rate to fall from 35 percent to 20 percent, making U.S. companies more competitive in the global economy. China’s corporate rate stands at 25 percent, for example, Ireland is at 12.5 percent, Great Britain at 19 percent, and Canada levies a 15 percent corporate rate.
Even France’s 33 percent rate is more competitive than the U.S. rate, given that America has the highest corporate tax of advanced economies. Now French President Emmanuel Macron has proposed cutting his nation’s rate to 25 percent.
In addition to healing the self-inflicted economic wound that is the current U.S. corporate tax rate, Congress will soon begin moving a reform plan that ends the double taxation on income earned abroad by U.S. companies.
By some estimates, $2.5 plus trillion in American business earnings remains stranded overseas, money that should be allowed to be repatriated back to the U.S. without the stiff double taxation penalty.
Meanwhile, the 30 million smaller businesses we estimate pay taxes through the personal income tax system (aka "pass-throughs") will see their rates fall from a high of 44 percent to 25 percent. Business investment can largely be expensed the first year, replacing long depreciation schedules.
For individuals and families, the number of personal income tax brackets will be cut to four: 0 percent, 12 percent, 25 percent and 35 percent. The standard deduction will double from $12,000 for a married couple to $24,000. The so-called death tax, which has existed in some form or another since 1797, finally meets its own demise and the Alternative Minimum Tax will be repealed.
Contrary to conventional wisdom, overtaxed citizens of blue states and deep blue cities will actually be among the biggest winners from tax reform that ends the SALT deduction.
Why? Because the federal tax subsidy driving higher state and local taxes will be eliminated and the bias against state and local tax reduction will end with it. Different people will win elections in cities and states that find their overspending no longer subsidized by others.
The federal government, especially a federal government that is $20 trillion in debt, has no business subsidizing the overspending of governors like Jerry Brown of California, Andrew Cuomo of New York, Dannel Malloy of Connecticut and their ilk.
By ending this inappropriate practice as part of tax reform, Congress can make tax relief for all Americans a reality.
Grover Norquist is president of Americans for Tax Reform.
Patrick Gleason is Americans for Tax Reform’s director of state affairs.