How a Dash of SALT Could Hand the House to Democrats
By Ryan Pougiales
On August 5th, 1993, Democratic U.S. Representative Marjorie Margolies-Mezvinsky cast the deciding vote for President Clinton’s budget. Margolies-Mezvinsky, who represented a toss-up district in the Philadelphia suburbs, faced Republican jeers of “Bye-bye, Margie” as she voted. The next year, she lost her seat. Now in 2018, President Trump’s new tax law — the one he declared in the State of the Union will give “tremendous relief for the middle class” — may cost Republicans their House majority. It could come down to a dash of SALT and Republican-held swing districts in places we have called “thriving suburban districts.”
Let’s back up. One of the (many) problems with Trump’s new tax law is a provision that is an unexpected, large, and targeted tax hike on millions of American families. This comes in the form of the first-ever cap on state and local tax deductions (SALT). SALT deductions primarily affect middle- to upper-income families who live in places with high property values and taxes. These families will get a drop in their individual tax rates from Trump’s tax law, but for some, the SALT deduction cap will completely reverse these gains. On average, Republican legislators represent fewer families who will get burned by the new SALT cap. These days, Democrats tend to live in high-tax areas; Republicans in low-tax areas. But 20 Republican House members who voted for the tax bill represent SALT-heavy suburbs and exurbs around the country — areas that are key to Democrats’ fight to win back the House in 2018. Ten of these Republicans represent swing districts, and they are now even more endangered after this tax hike. And several of the other 10, who represent districts where incomes are not quite as robust, could fall in a wave.
The SALT Deduction Change
Before the Trump tax bill, tax filers who itemized could deduct 100% of their state income or sales taxes, as well as all property taxes. In 2015, 29.6% of tax filers used the SALT deduction. Under the new tax law, the SALT deduction is capped at only $10,000. For comparison, the average SALT deduction in New York State was $22,169 in 2015. And in high-income, high-tax areas within states, such as Long Island in New York State, tax filers’ SALT deductions are often far above statewide averages. As a result, many of these tax filers will transition to the standard deduction, some will recoup losses due to other new provisions, but others will face an outright tax hike. The consensus coming out of the tax bill fight is that tax filers who use the SALT deduction are among the “losers” under the new law.
The 20 Republican Districts Where SALT Matters Most
The tax bill passed the House by a 224–201 margin on December 20, 2017. Zero Democrats voted for the bill, while 12 Republicans voted against it. Among the 224 Republicans who voted for the bill, 20 legislators are singled out here because their constituents are disproportionately affected by the SALT deduction cap; each one represents a district where more than 40% of tax filers used the SALT deduction in 2014 (the most recent year congressional district data is available from the Tax Policy Center). Several of these districts will be key in the fight for the House this year: Hillary Clinton won six of the 20 Republican districts outright in 2016, and she lost four additional districts by less than five points.
The table below shows the 20 Republican legislators who voted for the tax bill and represent districts with the highest shares of SALT deduction tax filers (excluding Members who are retiring). From top to bottom, it is ordered by Clinton’s margin versus Trump in these districts. For example, Republican Steve Knight represents CA-25, which Clinton won by seven points and where 41.5% of tax filers used the SALT deduction in 2014. It is unlikely that the SALT deduction issue will flip a district Trump won by 25 points, but it could impact a close or toss-up race. Voters will have an opportunity to hold these Republicans accountable for their tax votes this November.
2016 Presidential Performance by District and Tax Returns with SALT Deduction
The SALT Vulnerability Map
The 20 Republican legislators listed above who voted ‘yea’ on the tax bill come from all over the country, but their districts share a similar profile: they are clustered around major metro areas in upscale suburbs. Across the 20 districts, the percentage of tax filers who used the SALT deduction ranged from 40.2% to 51.7% in 2014.
Virginia’s 10th Congressional District (VA-10), which is represented by Republican Barbara Comstock, had the highest share of SALT deduction tax filers on this list at 51.7%. Voters in this suburban Northern Virginia district supported Clinton over Trump by a 10-point margin in 2016, 52% to 42%. At the state level, the average SALT deduction in Virginia was $11,288 in 2015. But in VA-10, where the median household income is $52,270 above the state average, most tax filers’ SALT deductions are even larger. And remember, now anything over the $10,000 SALT deduction cap is no longer tax deductible. For Comstock, her ‘yea’ vote on the tax bill amounted to a tax hike for many of her constituents.
Percent of Tax Returns Using SALT Deduction by Congressional District
Filers’ tax liabilities came from different sources across these 20 districts. In Illinois’ 6th (IL-6) and 14th (IL-14) Congressional Districts, well-to-do suburban and exurban districts outside of Chicago, tax filers pay some of the highest property taxes in the country. In Illinois, the average SALT deduction was $12,524 in 2015, putting filers $2,524 over the new $10,000 cap. These traditionally Republican districts swung toward Clinton in 2016; she won IL-6 by seven points and narrowly lost IL-14. California is home to four of the 20 districts. There the state income tax rate goes up to 13.3%, while the average SALT deduction hit $18,438 in 2015 — or $8,438 over the new cap. One benefit of the SALT deduction is that it is adaptable to local tax systems, but by capping the deduction at $10,000, this benefit has been sharply curbed.
The Political Cost for Supporting the Tax Bill
New research from Democratic strategists John Hagner and Jesse Ferguson, done on behalf of Protect Our Care and Not One Penny, has estimated the political cost House Republicans face for their ‘yea’ vote on the tax bill. In research conducted across 18 battleground Congressional districts, voters were asked to rate their Member of Congress. When they were told: “[your Member of Congress] voted for the tax bill that just passed Congress,” the unfavorability rating for that Member increased by seven points. Additionally, when voters received additional information about the bill, like how it can cut corporate taxes by 40%, Members’ “very unfavorable” ratings jumped by 11 points. In the fight for the House in 2018, the SALT deduction cap is a negative feature of the tax law that may resonate with suburban and exurban voters.
The 20 legislators profiled in this memo did not have to vote against their constituents’ interests on the SALT issue. The 12 House Republicans listed below voted ‘nay’ on the final tax bill; but, will this vote inoculate them from attacks on the new law? Several are vulnerable in 2018, and three — Darrell Issa, Rodney Frelinghuysen, and Frank LoBiondo — retired rather than face their voters again in November.
House Republicans Who Voted ‘Nay’ on the Tax Bill
Congressional Republicans — both the overwhelming majority who supported the tax bill and even the handful who opposed it — own this new tax law that gives the most benefits to the wealthy and corporations, while plunging our nation further into debt. Soon, they will have to answer for it.
Ryan Pougiales is the senior political analyst at Third Way.