The Department of Economics is excited to celebrate the Jonathan B. Rintels Prize being awarded to Economics Major Kavya Nivarthy ’25 for her excellent thesis The Taxing Divide: Realigning Political Effects of the 2017 State and Local Tax (SALT) Deduction Cap. Congratulations Kavya!
As Ben Valentino, Associate Dean for the Social Sciences, notes: Nivarthy studied how the percentage of the vote received by Republican candidates shifted across all presidential and congressional elections from 2012 to 2024. Her results show that the Republican Party did indeed pay a price. Voters in counties that experienced higher average tax increases under the new law shifted more toward Democrats. These shifts were significant—potentially large enough to have changed the outcomes in some elections. Nivarthy also used survey data to show disproportionate declines in conservative ideology among those hit hardest by the cap, even within counties. She goes to great lengths to rule out possible confounding explanations for the relationship, employing a variety of sophisticated methodological approaches. Overall, I agree with (Liz) Cascio’s assessment that “This is a magnificent piece of work.” It is a sophisticated and compelling analysis of a key question at the intersection of economics and politics.
Kavya graduated with High Honors in Economics, was a member of the Dartmouth Economic Research Scholars, and the recipient of the Lewis H. Haney Prize for outstanding honors theses.
Congratulations also to her advisors Professor Liz Cascio and Professor Doug Staiger, and to the theses class instructors Professor Paul Novosad, Professor Ethan Lewis, and Professor Bruce Sacerdote.
The Taxing Divide: Realigning Political Effects of the 2017 State and Local Tax (SALT) Deduction Cap
Abstract:
This paper provides evidence that President Trump's $10,000 cap on the state and local tax (SALT) deduction, signed into law in 2017, hurt Republicans electorally. Using county-level tax and election data, I compare changes in voting patterns between counties with varying levels of SALT cap exposure before and after the cap. I find that a $1,000 increase in pre-cap average SALT deductions was associated with 1.65 and 1.39 percentage point declines in Republican vote share in House and presidential elections respectively. This effect was sustained through several elections. A counterfactual exercise reveals that the cap cost Republicans as many as 46 House seats in 2022 and Trump the 2020 presidential election. I argue that the observed Democratic swing in affected counties is consistent with what other authors have documented as a “realignment" of affluent voters towards the Democratic party due to the parties' changing policy platforms.
