New State and Local Tax Deduction Plan Takes Shape

New State and Local Tax Deduction Plan Takes Shape


Despite resistance from critics across the political spectrum, a handful of blue-state lawmakers are continuing to push for an increase in the state and local tax (SALT) deduction. An earlier effort to do so was included in the Build Back Better bill that Democrats have largely abandoned, but now Democratic Reps. Tom Malinowski of New Jersey and Katie Porter of California have offered a revised version that would cost less while still providing significant relief to middle- and upper-middle-class families living in high-tax jurisdictions.

The proposed plan would eliminate the current $10,000 cap on the SALT deduction for households earning less than $400,000 a year. Households earning above amount would face a $60,000 cap on their deduction, with the cap shrinking as incomes rise and phased out entirely above $1 million. Taxpayers claiming the deduction would also have to declare that they are not billionaires.

The plan would raise about $150 billion over 10 years, the lawmakers say – not as much as the current law, but enough to cover the cost of adding hearing and vision benefits to Medicare, which comes with an estimated $120 billion price tag over a decade.

“When I first ran for congress, I promised to right the wrongs of the 2017 GOP tax bill by restoring the SALT deduction for my middle-class constituents,” Malinowski said in a statement. “This is a win-win approach that we hope will produce compromise on the SALT issue.”

Whatever its appeal, though, the plan is not expected to advance. “The SALT plan is unlikely to be taken up in Congress anytime soon,” Bloomberg’s Laura Davison wrote.