High-tax state push to repeal SALT cap a boon to the rich

By TaxesFOXBusiness

Governors worry SALT deduction change could affect state bond ratings

FOX Business’ Charlie Gasparino is reporting that state bond ratings agencies increase scrutiny of SALT deductions.

Repealing the contested $10,000 cap on state and local tax (SALT) deductions would largely benefit wealthier Americans, according to new data released by the Joint Committee on Taxation (JCT).

Continue Reading Below

Repealing the cap would decrease tax liabilities for 13.1 million people, the report – released on Monday – noted.

“Approximately 99 percent of the decrease in tax liability accrues to taxpayers with $100,000 or more of economic income,” researchers wrote.

MORE FROM FOXBUSINESS.COM...

Those with incomes of more than $1 million would see tax liabilities decrease by $40.4 billion. People with incomes between $500,000 and $1 million would see liabilities decline by $14.4 billion, while those earning between $200,000 and $500,000 would experience an $18.2 billion decline.

Overall tax liabilities would decrease by $77.4 billion, the group found.

The Tax Cuts and Jobs Act introduced a number of reforms, including the notorious $10,000 cap on state and local tax deductions.

Democratic lawmakers in high-tax states have repeatedly pushed back on the cap, which is detrimental to their residents. The $10,000 cap is well below the average amounts claimed by individuals in states like New York, California and New Jersey. The average deduction claimed in California, for example, is $22,000, according to Kevin de Leon, a Democratic member of the California state senate.

A handful of states have even sued over the portion of the tax law. The U.S. recently moved to have the suit dismissed.

The JCT revealed that nearly half of state and local revenues come from taxes.

As reported by FOX Business, residents have begun leaving higher-tax states to avoid increased financial obligations. Experts say that trend is only intensifying in the aftermath of tax season, when people saw the direct impact on their bank accounts.

CLICK HERE TO GET THE FOX BUSINESS APP

Meanwhile, the Treasury Department issued a final ruling earlier this month, effectively squashing a workaround higher-tax states were attempting to use to help their residents evade the cap. The strategy involved allowing taxpayers to make charitable contributions to an established state fund in order to earn a credit.

The House of Representatives is holding a hearing on the SALT cap later this week.