In a conversation with Ben Harnwell on Friday’s WarRoom, RealClearMarkets editor John Tamney argued that reinstating the SALT (State and Local Tax) deduction would limit federal government expansion and benefit the economy. He emphasized that keeping money in the hands of local governments and wealthy investors, rather than Washington, aligns with MAGA’s principles of local governance and entrepreneurialism.
What Are SALT Deductions and Why Are They Important?
SALT deductions allow taxpayers to subtract state and local taxes from their federal taxable income. Historically, this has been a lifeline for residents in high-tax states like California, New York, and Illinois, where local governments impose significant tax burdens. As Tamney explained, "If people paid a lot of state and local taxes, they could deduct that from what they owed the federal government. This was particularly important for blue states.”
However, in 2017, President Trump placed a cap on SALT deductions, limiting them to $10,000. This cap disproportionately affected high-tax, blue states, and its removal has become a contentious issue in both the MAGA movement and broader Republican circles. Trump himself has implied that capping the deduction was a mistake, and he has expressed interest in reversing the decision.
Tamney’s Argument for Bringing Back SALT Deductions
Tamney believes that the SALT deduction cap has done more harm than good. His central argument is that reinstating SALT deductions would limit the federal government’s power, keeping tax revenues in local governments where citizens have more control over spending. “We want to limit any way possible money flowing to Washington,” said Tamney, highlighting the MAGA movement’s priority of reducing the size and scope of federal oversight.
Tamney argues that the SALT deduction helps prevent federal tax increases by allowing states to retain more of their tax revenue. This aligns with MAGA’s belief in decentralized governance, where states have more autonomy to govern based on their needs and values. “We want local government. We want people to find their bliss in their state,” he said, underscoring the importance of states retaining fiscal independence from Washington.
Addressing the Critics: Red States vs. Blue States
One of the main reasons Republicans have opposed reinstating the SALT deduction is that it disproportionately benefits blue states. Red states, such as Texas, Florida, and Tennessee, with low or no state income taxes, view SALT deductions as unfairly subsidizing wealthier blue states. As Tamney noted, "Republicans make the case that Texas, Florida, and Tennessee are subsidizing blue states like California and New York.”
Tamney, however, sees this argument as flawed. He believes that low-tax states should support the deduction because it keeps more money from flowing into the hands of the federal government, thereby aligning with their anti-big government values. "Why on Earth would they want more of that money coming from big government states, like California and New York, flowing to Washington?” Tamney asked.
For Tamney, the solution is to allow blue states to keep their high-tax policies but ensure that federal tax revenue is limited. By doing so, red states benefit from a smaller federal government while allowing blue states the freedom to govern themselves. He explained, “Let those values of big bloated, high-tax governments stay in the states… Our goal is to make governments local.”
MAGA’s Stake in the Debate: Why Trump Supporters Should Care
The discussion ultimately circles back to Trump and the MAGA movement. Tamney emphasized that reinstating the SALT deduction would not only align with Trump’s economic policies but would also resonate with MAGA’s core belief in localized governance. "MAGA wants a successful Trump presidency,” Tamney stated, adding that Trump’s interest in reversing the SALT cap is in line with his America First platform.
Additionally, Tamney highlighted how the SALT deduction would benefit wealthy individuals who invest in job creation and economic growth. “The rich, by virtue of being rich, have the most disposable funds to invest. In returning the SALT deduction, what we’re doing is we’re keeping more money in the pockets of rich people… precisely the ones who can put wealth to work on the creation of new companies and jobs.”
Why This Debate Matters for the Future
Tamney’s argument calls attention to the broader philosophical divide within the Republican Party. On one side are those who prioritize low taxes across the board and a smaller federal government; on the other are those who believe the SALT deduction unfairly props up blue states. For Tamney, however, the choice is clear: “We win not through envy, but through optimism.”
Ultimately, the debate over SALT deductions encapsulates the core economic principles that drive the MAGA movement—local control, limited federal power, and a focus on entrepreneurialism. As Tamney concluded, “We want to keep money out of Washington’s hands. Local governments know better how to serve their people.”
Conclusion: As the GOP grapples with the future of SALT deductions, Tamney’s perspective, he says, offers a blueprint for aligning MAGA’s economic policies with Trump’s vision of America First, local governance, and job creation.
For more context, watch this full segment featuring John Tamney:
