Blue State Lawmakers Look to Raise SALT Deduction Cap

This content leverages data from USAFacts, a non-profit that visualizes governmental data. You can learn more on its website, Facebook, and Twitter.

Blue state lawmakers in the House are debating proposals to raise or eliminate the $10,000 cap on state and local tax (SALT) deduction, which is affecting higher-income taxpayers in their districts for the first time this tax season.

The Tax Cuts and Jobs Act, enacted in December 2017, reduced tax rates for individuals and businesses and reformed numerous tax deductions starting in the 2018 tax year. Among those was the SALT deduction, which was capped at $10,000 for filers after previously not being subject to a deduction limit.

As this chart from USAFacts shows, the SALT deduction has proven valuable in recent years to taxpayers who itemize their returns and claim it, peaking at $104.1 billion in 2017 ― the last tax year it wasn’t subject to a cap:

Proponents of raising or abolishing the SALT deduction cap argue that in its current form, the cap punishes taxpayers from high-tax states who used to be able to deduct their entire state and local tax bill from their federal tax bill.

Those who want the SALT deduction cap to remain in effect contend that because the Tax Cuts and Jobs Act doubled the standard deduction fewer taxpayers itemized their returns and had no need to claim the SALT deduction. They add that the SALT deduction primarily benefits wealthy taxpayers in high tax states, as data from USAFacts shows that in 2015 the average tax savings from claiming the SALT deduction per return was $144 for taxpayers earning less than $61,000; whereas taxpayers making over $113,000 saved $1,569 on average due to SALT.

Three bills to lift the cap on the SALT deduction have been introduced in the House:

• SALT Deductibility Act - H.R. 188: Sponsored by Appropriations Committee Chairwoman Nita Lowey (D-NY), this bill would repeal the $10,000 limit on the SALT deduction. It has 13 bipartisan cosponsors, including nine Democrats and four Republicans.
• Stop the Attack on Local Taxpayers (SALT) Act - H.R. 1142: Sponsored by Rep. Bill Pascrell (D-NJ), this bill would repeal the $10,000 limit on the SALT deduction and increase the top income tax rate to 39.6% from 37%. It has 45 cosponsors, with Rep. Chris Smith (R-NJ) the lone Republican.
• Raising the SALT Deduction Limit - H.R. 1757: Sponsored by Rep. Lauren Underwood (D-IL), this bill would increase the limit on the SALT deduction to $15,000 and index it to inflation. It has three Democratic cosponsors.

— Eric Revell

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