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A tax deduction known as SALT that helps affluent residents of high-tax states is standing in the way of President Donald Trump’s “big beautiful bill.”
A small group of Republicans is fighting to raise or abolish the $10,000 cap on the amount of state and local taxes you can deduct from your federal return that was originally introduced in Trump’s 2017 tax law. Lifting that cap would allow high-earning taxpayers in states and cities with high taxes to cut down what they owe to the feds.
“It is a Republican principle to allow hardworking taxpayers to keep more of their hard-earned money,” Rep. Nicole Malliotakis, a Republican from New York and member of the SALT caucus, a group of bipartisan representatives from states that would benefit from lifting the cap, said. “And that is the point that I have made over and over again in every room that I’ve been in on this discussion.”
Whether or not you care about SALT depends on how much you pay in state and local taxes. Americans in higher-tax states, like New York or California, would benefit from being able to deduct more from their federal taxes, while residents of states like Tennessee and Florida have a much lower local tax burden.
The map below shows the per capita amount residents in each state pay in state and local taxes.
In fiscal year 2022, the most recent year available, Washington, DC, had the highest tax collections per capita. High rates are mainly due to the need to maintain federal property, the Tax Foundation said. New York and California followed DC in the ranking. States with the lowest collections per capita were mainly in the South.
The Tax Foundation said people making above $100,000, concentrated in six states, including Texas and New York, claimed 91% of the SALT benefit before the $10,000 cap was created in 2017.
Now, SALT is in Congress’s crosshairs, with House Ways and Means Committee members voting for provisions that would raise that cap to $30,000. Marc Goldwein, the senior vice president and senior policy director for the Committee for a Responsible Federal Budget, said that the figure “gives a bigger tax cut to people that already got a pretty big tax cut” under the 2017 legislation.
Even so, the $30,000 already drew ire from SALT hawks, who want even more relief. Malliotakis said it wasn’t easy to triple the deduction in this iteration, but now they’re in negotiations to see what they can do to balance varying SALT interests.
Meanwhile, hardliner GOP members shot down the first iteration of the bill, saying they wanted deeper cuts in federal spending and to not increase the deficit — a big contrast to the Republicans hoping to deliver more relief in high-tax states.
Malliotakis said that they’re in active discussions with the chairman, speaker, and other committee members “to figure out if we can sweeten the pot a little bit.” Discussions have touched on a higher deduction number, income limits, and the length of time the deduction will be in place.
“At least we have a framework of what will satisfy the SALT caucus members or what potentially can satisfy the low-sodium members, as I like to call them,” Malliotakis said. “And we will hopefully get to a good spot.”
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