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Raising SALT Cap to $20,000 Would Mostly Benefit High-Income Households

Society


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  • Raising SALT cap to $20,000 would increase federal debt by $225 billion from 2025-2034
  • Nearly all the benefit would go to households making about $200,000 or more
  • The change would cut household taxes overall by an average of about $100
  • Almost none of the benefit would go to middle- or low-income households
360 summary
  • The SALT deduction cap was originally implemented as a political maneuver by former President Trump, primarily targeting high-tax blue states like New York and California.
  • Supporters of the cap argue that it helps increase federal revenue and only targets higher-income taxpayers, while critics say it's unfair since it's more harmful in states with higher costs of living and taxes.
  • Removing the cap or increasing it would significantly benefit residents of states like New York and California, enabling them to deduct a larger portion of the taxes they pay throughout the year.
NewsweekNewsweek
  • A group of Republican lawmakers, known as the "SALT Republicans," are pushing to either remove or substantially increase the SALT deduction cap, which is currently set at $10,000.
  • Some lawmakers, such as Representative Mike Lawler of New York, have proposed raising the cap to as high as $100,000 for individual tax filers and $200,000 for joint filers.
  • However, critics argue that increasing the cap would mainly benefit the wealthiest Americans and add billions of dollars to the federal deficit.
NewsweekNewsweek
  • Representative Nick LaLota prioritizes a reasonable increase in SALT deduction cap over the number of bills
  • New York Governor Kathy Hochul demands a full repeal of the SALT cap, which has cost New Yorkers up to $12 billion annually since 2018
  • Republicans aim to settle their differences on the policy before Trump takes office to pass a reconciliation bill without Democrat support
NewsweekNewsweek
  • Households making $200,000 or less would see no change in their after-tax incomes if Congress increases the cap to $20,000.
  • Those making between about $430,000 and $1 million (the highest-income 95-99 percent of households) would get a tax cut averaging nearly $1,400, or about 0.3 percent of their after-tax income.
  • The average tax cut for married couples would be about $270. But middle-income couples would get a tax cut averaging about $10. Those in the 95th-99th percentile would get an average tax cut of about $1,500.
ForbesForbes
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