With U.S. Senator Chuck Grassley
Q: What is the State and Local Tax (SALT) deduction?
A: As a senior member of the tax-writing Senate Finance Committee, I helped steer the Tax Cuts and Jobs Act into law that led to the greatest economic expansion in America in the last half-century. The 2017 tax law provided tax relief for everybody by lowering tax rates across the board and repealed and limited regressive tax benefits that are unfair to lower income Americans, such as capping the deduction for state and local taxes (SALT). The savings from rolling back tax breaks for the wealthy allowed tax writers to increase benefits to better target low to middle-income taxpayers. For example, the child tax credit was doubled from $1,000 to $2,000 and the standard deduction was nearly doubled for lower- and middle-income taxpayers. Almost immediately, lawmakers from high-tax coastal states kicked into high gear to repeal the SALT cap. Almost as soon as President Trump’s ink had dried, they sought all sorts of gimmicks and workarounds that would allow wealthy residents in their states to benefit. To be clear, repealing the SALT cap would largely benefit taxpayers with incomes exceeding $1 million. For the last four years, I’ve fought to keep the lid on the SALT cap. Once again, I’m fighting in the trenches to uphold the historic tax reforms enacted four years ago. This time the Biden administration has joined forces with the Democratic congressional leadership to put SALT on the policy chopping block. They’ve rolled SALT into their so-called Build Back Better spending boondoggle. The nearly $2 trillion partisan package would not only fuel the fires of inflation, it would undo tax fairness enacted in the 2017 tax law. Specifically, the House-passed legislation raises the SALT cap from $10,000 up to $80,000 per year. This would effectively result in taxpayers in Iowa and elsewhere subsidizing the state tax bills of wealthy taxpayers primarily residing in ultra-high tax blue states. Ironically, this line item would cost at least $230 billion over five years and benefit fewer than 10 percent of taxpayers, while most middle-class taxpayers wouldn’t see a dime, or could even see a tax hike, under their bill. President Biden’s Build Back Better plan may as well be called Blue State Billionaire Bailout.
Q: What’s going on with inflation?
A: Inflation hit hard over the Thanksgiving holiday. Fueling up the car to visit loved ones and buying groceries for the holiday feast took a bigger bite out of people’s wallets. In fact, inflation reached a 31-year high in October at 6.2 percent. Contrary to the Biden administration’s talking point that inflation is “transitory,” many of the nation’s top economists are saying inflation is a real and present danger to the economy and household budgets. It’s a hidden tax that hurts lower-income Americans the hardest. Prices for everyday goods are soaring, with no end in sight. Parents are paying more to put food on the table, from breakfast cereal to milk and ground beef. Gas prices are at a 7-year high. Farmers in Iowa and elsewhere are making plans for the spring planting season and the input costs for seed and fertilizer are through the roof. What do consumers do to stretch their purchasing power when inflation is on the rise? Families pull back on spending and put off buying big-ticket items. Many stop dining out and hunt for bargains at the grocery store. Inflation is like a noxious weed in the bean field that’s hard to root out once it starts spreading. When I first put my name on the ballot for Congress, I ran as the inflation fighter. Inflation was eating into the savings and livelihoods of Iowa farms, businesses and households. The dollar was stretched thin as costs for goods and services soared. Like a dog chasing its tail, higher prices plus higher wages became a self-fulfilling cycle. Government overspending back then added heat to the economy and inflation ratcheted towards 15 percent. Don’t forget, Congress just last year piped $4 trillion into the economy to provide urgent pandemic relief. Then, the Biden administration unleashed another $2 trillion in March when our economic recovery was underway. Now, the White House and Congress are looking to pour even more gasoline on the fires of inflation with a reckless social spending spree that’s chock-full of partisan priorities to score political points, such as ramping up federal tax credits for electric vehicles – including a discriminatory tax credit that supports union labor at the expense of non-union auto workers – and rewarding illegal immigration with mass amnesty. As the saying goes, hindsight is 20/20. Speaking from experience as a family farmer and lawmaker, inflation must be taken seriously or it’s going to get a whole lot worse before we dig ourselves out of it.
