Former president and Republican presidential nominee Donald Trump recently vowed to remove the SALT deduction cap if he is elected. Why is this surprising, and why does it matter? And what even is SALT?
The state and local tax (SALT) deduction allows taxpayers who itemize instead of claiming the standard deduction to deduct the value of taxes paid to their state and local governments against their federal tax liability. The deduction dates back to the Revenue Act of 1913, which created the federal income tax.
The SALT deduction shifts the burden of high state and local government taxes to the federal government. This primarily benefits wealthy taxpayers in high-tax states. The SALT deduction makes it easier for state policymakers to enact tax increases by shielding their constituents from the full impact of these hikes. The 2017 Tax Cuts and Jobs Act (TCJA) wisely capped the value of the SALT deduction at $10,000, which helped provide resources that were used to reduce tax rates in a broad fashion.
Despite claims from elected Democrats that the SALT deduction cap harms the middle class, tax data shows that eliminating the SALT cap would overwhelmingly benefit wealthy taxpayers. About 57 percent of the benefit of eliminating the SALT cap would go to the top 1 percent of taxpayers, while 83 percent would go to the top 5 percent. Taxpayers with $100,000 or more in annual income would receive 99 percent of the benefit of the SALT cap repeal.
Trump’s recent opposition to the SALT cap is surprising because the TCJA, which created the SALT deduction cap, was his signature legislative achievement. His reversal muddies the waters of the renewal of the TCJA, many provisions of which, including the SALT cap, will expire on December 31, 2025.
For more context on the SALT deduction, check out the NTU articles below:
What’s the Deal with Tax Cuts and Jobs Act Expiration in 2025? (August 2024)
SALT States Aren’t “Donor States,” They Have High-Income “Donor Taxpayers” (October 2023)
SALT Caucus Pushes Revival of Regressive Tax Break (August 2023)
New York Constitutional Challenge to SALT Cap Fails (April 2022)
SALT Cap Constitutional Challenge Faces Long Odds at Supreme Court (January 2022)
In Their Own Words: Things Elected Democrats Have Said About the SALT Deduction (September 2021)
What’s the Deal With the State and Local Tax Deduction? (September 2021)
Even The New York Times Now Agrees — Wealthy Taxpayers Don’t Need A SALTy Tax Break (May 2021)
Hello! You’ve Been Referred Here Because You’re Wrong About the Tax Cuts and Jobs Act (March 2021)