News on: On Menu of Tax Reform Options: Cutting SALT Deduction

Cutting the State and Local Tax (SALT) deduction is a tax reform option that's been on the table. The SALT deduction allows taxpayers to deduct certain state and local taxes from their federal tax bill. Currently, there's a $10,000 cap on this deduction, which was introduced as part of the 2017 Tax Cuts and Jobs Act.

Proponents of cutting or eliminating the SALT deduction argue that it disproportionately benefits high-income taxpayers and states with high tax rates. In fact, according to the Tax Policy Center, about 91% of the benefit of the SALT deduction goes to taxpayers with incomes above $100,000, with the majority of benefits concentrated in six states: California, New York, New Jersey, Illinois, Texas, and Pennsylvania.

On the other hand, opponents of cutting the SALT deduction argue that it would lead to a tax increase for many middle-class families and could harm states that rely heavily on local taxes to fund public services.

Some proposals have been floated to modify or eliminate the SALT cap. For example, one proposal would double the cap to $20,000 for married joint filers, while another would increase it to $100,000 for unmarried taxpayers and $200,000 for married taxpayers.

Overall, the debate around the SALT deduction is complex and contentious, with different stakeholders advocating for different approaches. As tax reform efforts continue, it's likely that the SALT deduction will remain a key point of discussion.