Raising the SALT Cap Is Supposed to Benefit Whom, Exactly?

The Tax Cuts and Jobs Act that President Donald Trump signed into law in December 2017 imposed a $10,000 limit on the amount of state and local taxes that can be deducted on a federal income tax return. Since then, this so-called SALT cap has been the subject of a constitutional challenge from New York, New Jersey, Maryland and Connecticut that was turned back by the federal courts, and persistent agitation from elected officials in those and other affluent high-tax states — where many people pay far more than $10,000 in state and local taxes each year — that after more than seven years now seems on the verge of bearing political fruit.

Republican lawmakers from New York, New Jersey and California traveled to low-tax Florida last weekend for a chat with the man who gave us the SALT cap, and it went well. President-elect Trump is “fully supportive of raising the cap,” Representative Mike Lawler of New York reported afterward. “He really communicated that he feels for how unaffordable the taxes are for our constituents,” said fellow New Yorker Nick LaLota.

Taxes may well be unaffordable for some of Lawler and LaLota’s constituents — New York has the nation’s highest state and local taxes, after all. But except among the very highest earners in New York, federal income taxes are not on balance any higher than they were before the SALT cap went into effect. Federal tax rates went down from 2017 to 2018 for every income group except those making $1 million or more a year and stayed below 2017 levels through 2021, the most recent year for which the Internal Revenue Service has released the data. The biggest tax-rate declines were for those with adjusted gross incomes of $200,000 to $500,000, taxpayers who are not exactly middle class but are often portrayed sympathetically in the financial media as HENRYs, for high earners, not rich yet. (I’m ignoring tax filers with adjusted gross incomes of less than a dollar, a small and anomalous group for which tax rates can’t be meaningfully calculated because its aggregate income is negative.)

SALT cap