by Donna Martinez
Former Senior Writer and Editor, John Locke Foundation
We’ve heard the characterization plenty of times over the years: Republicans are the party of the rich and Democrats are the party of the working class. It’s a narrative that was so ingrained in my working-class family that my relatives assumed I would follow their lead and vote for candidates who care about ‘people like us.’
It’s getting harder for Democrats to hold onto the story. In Washington, D.C., right now, one of the biggest debates is about the SALT deduction. Here’s how the Tax Foundation describes SALT:
The state and local tax (SALT) deduction permits taxpayers who itemize when filing federal taxes to deduct certain taxes paid to state and local governments. The Tax Cuts and Jobs Act (TCJA) capped it at $10,000 per year, consisting of property taxes plus state income or sales taxes, but not both.
The cap impacts wealthier people who live in high-tax states — mostly blue states. That reality has D.C. Democrats scrambling to lift the cap, while at the same time telling the public that the Build Back Better plan is all about helping the little guy. In reality, the massive social spending plan would damage the economy, as Locke’s Paige Terryberry explains here.
On Wednesday, Sen. Thom Tillis joined a GOP news conference to lay out the facts of the Democrats’ push to lift the $10,000 cap on the SALT provision. Tillis, of course, is a former Speaker of the House in the North Carolina General Assembly. He’s also a businessman, and he knows tax policy. He was a guiding force behind our state’s tax reform push, and he pointed Sen. Chuck Schumer and Speaker Nancy Pelosi to our state at the news conference.
Sen. Tillis is spot-on about the flawed tax policies faced by North Carolina fiscal conservatives when they took power a decade ago. Locke’s Brooke Medina explained the 2010 landscape – and ensuing reforms – this way in a recent overview of North Carolina’s economy:
2. Taxes – In 2010, North Carolina was home to one of the worst business tax climates in the nation, and our state’s unemployment rate was a full percentage point above the national average. Unchecked and irresponsible economic policies enacted by a legislature that had played too fast and loose with taxpayer dollars led to exceedingly high unfunded liabilities and unfavorable conditions for businesses.
It has been 11 years since that time, and we’ve made a major shift away from progressive economic policies, which is why we’re now one of the top states in which to do business and North Carolinians are able to keep more of their hard-earned money. And even more exciting, as of last week, we are on the cusp of yet another major tax reform, thanks to a General Fund budget just passed by the General Assembly and signed by Gov. Roy Cooper. According to fiscal policy analyst Paige Terryberry, this budget adds no new debt, reduces the personal income tax rate, begins to phase out the corporate income tax rate, and rejects the massive tax burden that would have come with expanding Medicaid.
This new budget isn’t perfect, but it’s a forward-thinking plan focused on opportunity and options.
And Importantly, the new budget continues the Republicans’ push to pay special attention to the working class. This week, I talked with Locke’s Becki Gray and Jordan Roberts about the expansion of the zero tax bracket, which helps those at the lower end of the earning scale the most.
Sen. Tillis deserves our appreciation for spending his time in the state legislature focused on lifting people up and giving them the opportunities to be self-reliant and productive while rewarding work. Now he’s trying to do the same thing for every American.