![]() Tom Suozzi (D-NY), Mikie Sherrill (D-NJ), and Josh Gottheimer (D-NJ) - all of whom represent districts with lots of high-earning individuals paying high taxes. Legislators in favor of lifting the SALT deduction cap include Reps. SKiW6x9HPB- Jake Sherman November 3, 2021 Here’s the SALT change in the dem bbb bill. In the most basic terms, the proposed changes to the SALT deduction would increase the deduction cap from $10,000 to $72,500 per year, with the raised cap set to expire January 1, 2032.Īccording to Roll Call, the new $72,500 cap would also be retroactive to the start of the year. What are the specific proposed changes to SALT, and who supports them? High earners in places with high taxes - primarily blue states like California, New York, and New Jersey - are more likely to be able to claim the SALT deduction in order to reduce their taxable income. Much as the 2017 deduction cap impacted higher earners - typically those earning more than $100,000 - by effectively increasing the amount of annual income subject to federal taxes, an increase in the deduction cap would primarily benefit those same higher earners.įurthermore, higher earners are more likely to own property and thus pay property taxes in their state and locality - another expense people can choose to deduct from their taxable income.Īccording to the Tax Policy Center, a joint project from the Urban Institute and the Brookings Institution, in 2017, 16 percent of tax filers with income between $20,000 and $50,000 claimed the SALT deduction, while 76 percent of tax filers with income between $100,000 and $200,000 claimed it, and over 90 percent of tax filers with income above $200,000 did. The amount they are able to deduct because of those state and local taxes, however, could. The types of expenses people can choose to deduct - income or sales tax, property tax, medical expenses, and charitable donations, for example - won’t change. Generally, taxpayers choose whichever avenue will be more beneficial for them - as in, whichever will leave them with less income to be taxed. Others, however, choose to itemize their deductions, so they can subtract things like charitable deductions and medical expenses. A lot of people just take the “standard deduction” and lop off a flat amount. When people file their taxes, they can deduct certain expenses to make their taxable incomes lower. If the SALT cap changes currently being discussed for the reconciliation bill go through, whether or not they’ll affect your tax bill depends on your income, where you live, and other specifics, like property ownership.Īs Vox’s Emily Stewart explained in April, people can choose to deduct some expenses from their taxable income. Here’s why some Democrats want to see the SALT cap lifted anyway, what that would mean for tax policy in the US - and how it could affect ordinary American taxpayers: How will a higher cap on the SALT deduction affect me? Now, the push to raise the cap is a way to get more Democrats - particularly moderates and the aforementioned legislators from high-tax states with high earners - on board with the broader reconciliation bill.īut given that the existing SALT cap aligns with the general progressive belief that the highest earners should pay more in taxes to fund investments like the BBB, Democratic support for raising it can be confusing. Imposing that cap primarily affected high earners in blue states and allowed the government to raise more money from taxes, though it was offset at the time by sweeping tax cuts in the same Republican bill. Sign up to receive our newsletter each Friday. ![]() Vox’s German Lopez is here to guide you through the Biden administration’s burst of policymaking. Before 2017, taxpayers who itemized their returns could claim an unlimited dollar amount as a SALT deduction subsequently, a Republican Congress passed the Tax Cuts and Jobs Act, or TCJA, limiting the eligible SALT deduction to $10,000 per year. ![]() The SALT deduction is a way for people, especially in states where income, sales, and property taxes are high, to escape double-paying on taxes they’ve paid for the services provided by states and localities - things like education, health care, and transportation. Specifically, Democrats in places with high state and local taxes, like California, New York, and New Jersey, are backing a proposal to raise the cap on the amount of state and local taxes individuals can deduct from their federal income taxes from $10,000 to $72,500. As negotiations over the Build Back Better Act (BBB) move forward, the state and local tax deduction, or SALT, has emerged as the latest intraparty bargaining chip in Democrats’ efforts to pass the $1.75 trillion social spending package. ![]()
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