Want a recession? Kill this business deduction and wait
When President Donald Trump returned to office in January, nearly everyone in his circle agreed on the top priority: renewing the 2017 Tax Cuts and Jobs Act. Without action, a crushing 22% tax hike looms, threatening to undo the economic gains of the past decade.
Extending the tax reform would also give businesses and investors the long-term stability they need to plan, expand, and hire.
Repealing the C-SALT deduction would hammer small businesses — the backbone of the American economy.
Instead, the administration has sent mixed signals. Daily shifts in tariff policy have rattled markets and injected uncertainty into every sector of the economy. Investors are jittery. Business leaders are holding back. And analysts are already warning of a potential recession.
These mistakes make it even more important to switch the focus to the tax package. The Trump administration should stop talking about tariffs and focus, along with Congress, on stabilizing markets and laying the foundation for economic growth by getting taxes down.
C-SALT: A conservative’s dream
The Tax Cuts and Jobs Act delivered everything conservatives had long demanded: 100% expensing for business property, a 21% corporate income tax rate, and a child tax credit that rewarded work. It stood as the defining achievement of Trump’s first term. Making it permanent could help revive the pre-COVID economic boom.
But lawmakers must resist the temptation to gut the law’s pro-growth provisions to fund unrelated priorities. That includes rejecting the misguided push to repeal or limit the corporate state and local tax deduction, known as C-SALT.
Debates about the individual SALT deduction cap have dominated headlines in Washington. Some reforms to that cap may make sense. But individual SALT and C-SALT are not the same issue, and they shouldn’t be treated as interchangeable.
C-SALT promotes growth by preventing double taxation on businesses. It lets employers reinvest earnings, stay competitive, and create jobs. Rolling it back would hit business owners hard, slow hiring, and weaken America’s edge in the global economy.
Policy groups like Americans for Tax Reform and the Tax Foundation agree: Gutting C-SALT would put long-term growth at risk — and betray the core economic agenda that fueled Trump’s first-term success.
For businesses, state and local taxes are an operating expense. If businesses lose the ability to deduct these taxes, they will be paying taxes on taxes.
Small businesses pay the price
Repealing the C-SALT deduction would hammer small businesses — the backbone of the American economy. Many already struggle under heavy corporate, state, and local tax burdens, especially in rural and Republican-leaning states. Removing this deduction would force them to shoulder a disproportionate share of the pain.
No serious conservative case exists for eliminating or capping the C-SALT deduction. Some Republicans seem confused, conflating C-SALT with the personal SALT deduction, which overwhelmingly benefits wealthy taxpayers in high-tax blue states. But they are not the same. As the Tax Foundation notes, capping C-SALT won’t “reduce distortive tax benefits or enhance state competition” the way a cap on the personal SALT deduction might — because corporate and individual tax systems function differently.
In 2023, American businesses paid nearly $1.1 trillion in state and local taxes. Stripping away their ability to deduct those taxes from federal corporate income tax amounts to a massive tax hike — potentially hundreds of billions of dollars over the next decade.
That kind of tax increase would erase much of the economic progress since the 2017 tax law was passed. It would punish the very job creators conservatives claim to champion.
Lawmakers in Congress — especially Republicans who support free enterprise and pro-growth tax reform that spurs economic growth — should focus on restoring and making permanent the 2017 Tax Cuts and Jobs Act’s tax cuts without jeopardizing the benefits that the C-SALT deduction provides for American businesses of all sizes.
If we're serious about saving America, we need a leader who's willing to be hated by the pundits, pollsters, and even some short-term-minded Americans to do what's right.
The onus is on those whose favored policies have left us imperiled to present a better plan than Trump’s to defend America’s interests.
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