Millions of upper-middle class households in high-tax states paid lower taxes in 2018 thanks to the Tax Cuts and Jobs Act, despite the new $10,000 limit on state and local tax deductions, says The Wall Street Journal’s Richard Rubin.
According to calculations by the Tax Policy Center, the tax law’s big increase in the alternative minimum tax (AMT) exemption more than made up for the loss of state and local tax deductions for millions of high-income taxpayers. About 95% of the 3.5 million households earning between $200,000 and $500,000 that paid the AMT before the tax overhaul went into effect got a tax cut in 2018, with the cuts averaging more than $3,600.
“AMT cuts outweighed the hit from the deduction cap” for that income group, Rubin says, while noting that AMT households earning less than $200,000 and more than $500,000 received smaller cuts on average.
Why it matters: Some blue state lawmakers are pushing to raise or eliminate the $10,000 state and local income tax deduction, saying it unfairly hurts households in high-tax states such as New York and California, but that would likely end up giving another tax cut to households that already benefited from the Republican tax law thanks to changes in the AMT.