Why the SALT Cap Battle Matters More Than You Think
Hey, let’s talk about something that’s getting a lot of attention right now — the SALT cap. No, not table salt — we’re talking about the State and Local Tax deduction. If you pay attention to tax policy or live in a high-tax state like New York or California, this is something that directly impacts your wallet. And right now, it’s stirring up quite a political fight.
So, what is the SALT deduction? Basically, it lets people who itemize their federal tax returns deduct what they’ve already paid in state and local taxes — income, sales, and property taxes. But here's the catch: in 2017, the Tax Cuts and Jobs Act put a cap on this deduction — just $10,000. Before that, there was no cap. This move was part of a broader strategy to offset the cost of other tax cuts in the bill. The cap had a big effect — reducing the number of people who claimed the SALT deduction from about 25% of filers down to less than 10%.
Now, as lawmakers look to make those 2017 tax cuts permanent, they’re debating whether to lift or raise the SALT cap. A proposal on the table would increase the cap to $30,000 for joint filers making under $400,000 and single filers earning under $200,000. Sounds generous, right? But here’s the issue: this doesn't go far enough for some Republicans from high-tax states. Their voters are hit hardest by the cap and want even more relief. Meanwhile, Republicans from low-tax states argue the deduction mostly benefits wealthier households and doesn’t help their constituents at all.
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This internal GOP divide is threatening to derail a larger tax package that’s a big part of former President Trump’s policy legacy. Supporters of raising the cap argue that without more generous limits, the current structure punishes taxpayers who happen to live in states with higher taxes. On the other hand, critics call it a subsidy for the rich and a bad use of federal dollars.
Let’s put numbers to it. In 2020, only 8.6% of tax returns claimed the SALT deduction. But in some places — Maryland, Washington D.C., and parts of California and New York — that number was way higher. Before the cap, the average SALT deduction was about $13,000, and in some wealthy counties, it was over $30,000. It’s easy to see why people in those areas want that cap lifted.
For high earners, the cap made a big difference. The top 1% saw their average tax cut shrink from $71,000 to $40,100 because of the SALT cap. Meanwhile, folks in the bottom 80% of earners didn’t feel much change either way. This is why the debate has such a strong class and regional component.
So, where does this go from here? Lawmakers are still trying to negotiate a version of the cap that can get enough support to pass. But with the divide between red-state and blue-state Republicans, it won’t be easy. This isn’t just a tax policy fight — it’s a battle over whose interests get priority in federal tax law.
And that’s why the SALT cap debate is about more than just taxes — it’s about equity, geography, and power. Keep an eye on this one. It could shape what your tax bill looks like for years to come.
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