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A very scary headline

Summary:
This Bloomberg headline doesn’t look very promising: SALT-Cap Repeal Gains Momentum With House Bipartisan Caucus It”s hard to think of any plausible legislative action that would be worse—a huge tax cut going mostly to people making over ,000,000/ year, which also somehow makes the economy less efficient. Oh, and it would give me headaches (not that anyone cares), as I’d have to go back to itemizing all my deductions instead of taking the standard deduction. And it would encourage state and local governments to spend money on wasteful boondoggles that don’t make sense on a cost/benefit basis. Repeal of the SALT cap would undo one of the few helpful policy reforms of the Trump era. It would also confirm that the Biden administration is not serious about trying to

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This Bloomberg headline doesn’t look very promising:

SALT-Cap Repeal Gains Momentum With House Bipartisan Caucus

It”s hard to think of any plausible legislative action that would be worse—a huge tax cut going mostly to people making over $1,000,000/ year, which also somehow makes the economy less efficient. Oh, and it would give me headaches (not that anyone cares), as I’d have to go back to itemizing all my deductions instead of taking the standard deduction. And it would encourage state and local governments to spend money on wasteful boondoggles that don’t make sense on a cost/benefit basis.

Repeal of the SALT cap would undo one of the few helpful policy reforms of the Trump era. It would also confirm that the Biden administration is not serious about trying to improve the economy.

Eventually, the lost revenue would have to be recouped somewhere else. I doubt it will be through spending cuts; more likely Biden will have to raise taxes on average people. How long before they start discussing a VAT?

Of course some progressives will say that no one has to pay. We’ll just keep borrowing money for this and all the other shiny new toys coming out of Congress. No one has to pay for any of it.


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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