The Miles Davis of Tax Policy

Trump’s just making it up on the fly.

Leading the news this morning: Melania Trump’s latest video hawking her forthcoming memoir. “Why do I stand proudly behind my nude modeling work?” the former first lady asks over a string soundtrack. “The more pressing question is: Why has the media chosen to scrutinize my celebration of the human form in a fashion photo shoot? Are we no longer able to appreciate the beauty of the human body?”

Now on to some things that are also happening today, we guess. Happy Wednesday.

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(Stock photo via Shutterstock.)

Getting SALTy

—Andrew Egger

One of the weirdest parts of the past few years has been Donald Trump slowly distancing himself from the few unambiguously good things he did as president. Operation Warp Speed was memory-holed in the face of crackpot critiques from Ron DeSantis and Robert F. Kennedy Jr. He moved against TikTok as a national security threat—then reversed himself this year in an attempt to chase the youth vote (and campaign cash from a major TikTok stockholder).

Now, Trump is pledging to do away with one of the most straightforwardly good components of the only major policy bill he ever passed, the 2017 Tax Cuts and Jobs Act. The component: a $10,000 cap for the state and local (SALT) tax deduction, which allows people in high-tax states to deduct other taxes paid from their tax-eligible federal income.

Trump’s announcement, as befits a major policy rollout, came as a three-word digression—“get SALT back”—tossed off in the middle of a Truth Social rant about his rally on Long Island today:

Nassau Coliseum, on Long Island, will be a really big deal tomorrow. It will be PACKED with Patriots! We have a real chance of winning, for the first time in many decades, New York. Hundreds of thousands of Migrants, Crime at record levels, Terrorists pouring in, Inflation eating your hearts out - WHAT THE HELL DO YOU HAVE TO LOSE? VOTE FOR TRUMP! I will turn it around, get SALT back, lower your Taxes, and so much more. I’ll work with the Democrat Governor and Mayor, and make sure the funding is there to bring New York State back to levels it hasn’t seen for 50 years. People are fleeing, maybe we’ll get them to “flee back!”

There’s two main reasons why someone would support the existence (or restoration) of the SALT deduction. The first is the historical one: For a federalist, state and local taxes are properly considered prior to taxes paid to the federal government. SALT was the only deduction included in the first federal income tax ever passed by Congress in 1861.

Some conservative eggheads still care about this reason; nobody else does. The real base of those who want to restore SALT today is a different group: People living in high-tax states, who would save a bunch of money if the full deduction was restored. For the most part, these voters are relatively well-heeled—91 percent of the pre-TCJA SALT benefit went to households making more than $100,000, the nonpartisan Tax Foundation estimated. And for the most part, they are represented by Democrats in Congress.

So for 2017 Republicans, targeting SALT as a way to pay for some of their other proposed tax cuts was a pretty nifty trick. It cut modestly against that narrative that their bill was a handout to corporations and the wealthy and forced Democrats like then-Senate Minority Leader Chuck Schumer to stick out their necks for an inarguably regressive tax structure.

Today, though, Republicans have their own reason to care about New York voters: Their hopes for retaining the House majority rest in large part on successfully defending seats in bluish-purple districts they picked up there in 2022.

For those half-dozen House Republicans, restoring the full SALT deduction is their policy white whale. For Trump to embrace their point of view on the eve of a trip to their region is like a week full of Christmasses for the likes of Reps. Anthony D’Esposito and Nick LaLota.

Why Trump would suddenly take up their cause now is anybody’s guess. But perhaps it was less about their chances and more, as he suggested in the post, about his own. Trump isn’t winning New York in a million years, but I’m sure he had a nice time hearing from a chorus of GOP lawmakers and major donors that he might have a real shot—if only he’d embrace restoring the SALT deduction.

Or maybe it wasn’t even as complicated as that. Maybe it was just the latest piece of witless tax policy sloganeering from a guy building his whole tax-policy pitch around carving a whole jack-o’-lantern of new loopholes into America’s tax policy base. We’ve already seen him unveil plans for no tax on tips, no tax on social security benefits, and no tax on overtime hours. These are all pleasant ideas on paper. They’d also dramatically distort markets, add still more complexity to the tax code, create new opportunities for the wealthy to squirrel away tax-free income, and—according to the Tax Foundation—increase federal deficits by a lower-bound estimate of $2.4 trillion over the next decade.

Uncapping SALT would be good for an extra $1.2 trillion gone from federal coffers over the same span, the Joint Committee on Taxation estimates. But hey: You can always just slap on another tariff!

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The Hold-Steady Tour

—William Kristol

As Andrew explains above, Donald Trump now wants to restore the SALT exemption that his own tax bill limited in 2017. He’ll presumably go on about this proposal tonight at the Nassau Coliseum.

But while Trump talks, the Fed will have acted. The big economic news of the day will be that the Federal Reserve is cutting interest rates, signaling that inflation is at long last under control.

This provides a political opportunity for the Harris campaign—one that could well be more significant than Trump’s pander.

Harris’s opportunity is not to emphasize the Biden administration’s overall responsible and competent management of the economy—though the administration (and the Fed) have in fact been mostly responsible and competent! After all, we’re enjoying an impressively soft landing, after the turbulence generated by the pandemic and the policy responses to it. Unemployment is low, inflation has subsided, and both capital (the stock market is up) and labor (real wages are rising) are doing well. Goldilocks, call your office!

But the country isn’t in a Goldilocks mood, and it would be a mistake to seem at all complacent or even satisfied. Nor should Harris’s focus be backward-looking. What the Harris campaign can do is to echo the arguments of Harvard economist and Obama alum Jason Furman in yesterday’s Wall Street Journal. Furman made the forward looking case that Harris’s policies—while by no means perfect (the Harris campaign needn’t share that part!)—are a lot safer for the economy than Trump’s.

And it can make the case politically in the way James Carville sketched out last week in our conversation. Not that things are great and that it’s time for high-fiving and back-slapping. But that things are improving, that Harris’s policies will continue the improvement, and that Trump’s policies put all our recent gains at risk.

Here’s Carville on the politics of the economy for the Harris campaign:

My sense is that there’s a little momentum out there . . . improved consumer confidence numbers and stuff like that. You certainly shouldn’t go out and tell the people that your economy’s great or good, but you can imply that you have something at risk now. You start laying tariffs on everything and start doing a lot of herky-jerky stuff, you could make things worse. And I think there’s a real opportunity there.

The Harris campaign needs to convince some voters that Trump’s policy proposals are chaotic and not well-considered, and that they would endanger the economic recovery we are finally enjoying—that, in a word, they’re too risky. That (correct!) argument could help neutralize the edge Trump now has in the polls on the economy, an edge based on a nostalgic view of how good things were in his first term.

That view whitewashes a lot of reality, if not all of 2020. But it’s hard to correct that view at this late date. The good news is that elections are more about the future than the past. And the message that a Trumpist economic future is risky could be effective. In this respect, Trump’s proposal to reverse course on part of his 2017 tax bill can be used as an example of his volatility. Who knows what other arbitrary decision he’ll make?

This argument—against risk, for steadiness—is not a natural argument for Democrats to make. Many Democrats became Democrats because they want to be the party of . . . progress! Exciting change! Even I, as a crusty old ex-Republican, can sympathize with that impulse in certain ways.

But on the economy, at this moment, it seems to me the Democratic party needs to be the party of steady progress, while making Trump the embodiment of risky adventurism. Two Democratic presidents have won reelection in the last eighty years—Bill Clinton in 1996 and Barack Obama in 2012. Both ran as liberals—even progressives—who warned against risking steady progress that was being made. Steady progress isn’t as exciting as bold change. And it can’t be allowed to be confused with complacency about the status quo. But it can be a simple, true and, I think, winning message.

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Kingdom Khan

—Sam Stein

Barack Obama’s 2012 campaign manager Jim Messina appeared on CNBC yesterday, during which he said he did not believe FTC Commissioner Lina Khan would stay in her post if Kamala Harris won. Messina’s case was that Kahn, who has made her mark as a skeptic of the consolidation of corporate power, couldn’t get confirmed in a closely divided Senate, which belies the fact that she has defenders among a certain sect of conservatives. But the bigger question may be: Would Harris even nominate her? In mid August, I began asking the campaign this question. They steadfastly refused to engage. I asked again last night. And they continued to not commit to saying whether Kahn would get the nod.

The Harris camp isn’t really making any personnel announcements at this juncture. So not directly weighing in on Kahn’s future isn’t a shock. But folks in the anti-monopoly space say that, despite the policy pronouncements centered around tackling price gouging and mergers, they want to see the VP give a nod to the work Kahn is doing. “Harris’s team clearly understands the intersection of political and economic reality demands pushback on corporate power,” said Jeff Hauser, founder and executive director of the Revolving Door Project. “She’d do well to specifically praise Lina Khan and Jonathan Kanter and convey that the she is totally unbought.”

Quick Hits

OTHER THAN THAT, THOUGH: Last night, JD Vance was asked by a reporter why he didn’t fact check claims from his constituents who were saying, allegedly, that Haitian migrants in Springfield, Ohio were eating cats. Vance insisted it was the media’s responsibility to fact check the residents of Springfield, “not lie about them.” He seemed pleased with himself as the audience roared with applause. Well, this morning, the Wall Street Journal reports that Vance’s office did actually reach out to the Springfield city manager to see if there was any validity to the rumors about Haitian migrants. The staffer was told that it was all baseless. Vance, nevertheless, kept up his post on X about the rumors. And that night, Donald Trump went on the debate stage and just stated it as fact. But that only touches the surface of the Journal story. The paper was also provided, by Vance’s office, a police report from a resident who said her pet might have been taken by Haitian neighbors. The reporter went to that person’s house. The resident said her cat had actually returned a few days after it went missing, found safe in her own basement. She had apologized to her Haitian neighbors.

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TWIRLING TOWARDS FREEDOM: Kamala Harris has her campaign strategy and she’s sticking to it, per Politico:

Kamala Harris largely stuck to her script during an interview Tuesday with a panel of National Association of Black Journalists members, carefully parrying questions about hot-button issues like the war in Gaza, reparations and other critical election topics.

It was the vice president’s second high-profile national media interview since announcing her presidential run, and though she spoke passionately at times about abortion rights and other policies, she did not break much ground or stray far from her talking points during the near hour-long conversation.

The Harris campaign has plainly decided that they’ve already gotten as much political upside out of policy talk as they’re likely to get, and they’re determined to make as few new policy waves as possible over the closing stretch of the campaign. Whether they leave voters on the table in doing so—or cede Trump back his preferred central place in the media spotlight down the home stretch—remains to be seen.

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