Next year, we go into the final year of the Republican tax reform law's SALT cap.
Since the Tax Cuts and Jobs Act (TCJA) of 2017 took effect, taxpayers in high income and property tax states and their Capitol Hill reps have been fighting the law's limit on state and local taxes, or SALT, that can be claimed as an itemized federal deduction. Their main argument is that the TCJA's $10,000 cap is too low.
From a fiscal perspective, supporters of the cap pointed out that it benefited wealthier taxpayers. Their big SALT claims also cost the U.S. Treasury lots of revenue.
The cap allowed lawmakers to ostensibly play tax Robin Hood and use the SALT benefit taken primarily from richer filers to pay for other broader TCJA changes, like overall lower income tax rates.
Tax creates political problems: Politically, the cap also meant lots of residents of predominantly Democratic New York, New Jersey, and California lost a valuable taw write-off. That wasn’t lost on Republicans, who alone (OK, with some lobbyists' help) wrote and pushed TCJA through during Donald J. Trump’s administration.
But as time wore on, and the 2024 election year rolled around, it became obvious that taxes don’t always follow political boundaries. Constituents in areas represented by GOP lawmakers also took SALT cap hits, and continued to complain.
So, some of those Republicans started talking about at least tweaking, if not repealing, the SALT $10K limit.
A Republican effort earlier this year to temporarily double the SALT cap for married filers failed. But now, the man who signed TCJA into law says he’s all for repealing the federal tax deduction limit.
Campaign promise complications: Of course, as noted, it’s an election year, a time when all candidates tend to make promises they know won’t be kept. And Trump is the king of reading crowds and telling them what they want to hear.
It was no real surprise, then, that in advance of a campaign event last week on Long Island, New York, one of the Empire State’s more conservative areas, Trump took to his Truth Social account to announce, "I will turn it around, get SALT back, lower your Taxes, and so much more."
That promise prompted this weekend’s Saturday Shout Out to the coverage of Trump’s SALT flip-flop, and its tax and political implications.
Trump Floats Easing Cap on State and Local Tax Deductions by Richard Rubin for the Wall Street Journal.
The Trump tax flip-flop that could help Republicans win the House by Ally Mutnick and Sarah Ferris for Politico.
Trump signals SALT deduction cap reversal by Rebecca Falconer for Axios.
Trump calls for undoing part of his own tax law, vowing to 'get SALT back' by Sahil Kapur for NBC News.
Trump sounds reversal on SALT deduction cap by Tobias Burns for The Hill.
Trump created the controversial $10,000 SALT deduction cap. Now he wants to end it by Aimee Picchi for CBS News.
Trump Pledges to Restore SALT Write-Off at Long Island Rally by Hadriana Lowenkron for Bloomberg (via Yahoo!News)
Trump says he would uncap the state and local tax deduction, a California favorite by Seema Mehta and Hailey Branson-Potts for the Los Angeles Times.
Trump Suggests Restoring the State and Local Tax Break He Once Limited by Andrew Duehren for the New York Times.
Taxes depends on Congress: Again, Trump’s talk of getting SALT back and lowering other taxes is only a campaign promise. Many of those are broken after the votes are counted for a variety of reasons.
One of the major explanations as to why promises don’t turn into reality is the way, with a nod to Schoolhouse Rock, bills become law.
A president or president-elect or presidential wannabe can say anything about all types of taxes. But it is Congress, specifically the House (although Washington, D.C., lawmakers have used work-arounds), that must develop and then pass tax legislation. Then it goes to the Oval Office for signing into law.
Although Nov. 5 isn’t that far away, we still are a long way from knowing the make-up of the 119th Congress. Which party controls the House, Senate, and White House will determine what happens to the SALT cap and all the other TCJA provisions that expire at the end of 2025.
You also might find these items of interest:
- Biden's just-enacted tax (and more) bill is SALT-free
- Maximizing your Schedule A itemized tax deductions
- Judge dismisses states' challenge to SALT deduction limit
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