Don't Trade SALT for Broccoli
Republicans on the House Ways and Means Committee have proposed three tax bills under the umbrella titled “American Families and Jobs Act.” It’s impossible to do a comprehensive analysis in this short article. Instead, I focus here on one good thing: it keeps the State and Local Tax (SALT) limit, a key feature of the 2017 Tax Cuts and Jobs Act.
The SALT limit caps the amount of state and local tax that taxpayers can claim if they itemize their deductions. The cap is $10,000 annually for individual taxpayers and for married taxpayers filing jointly. Before the 2017 tax cut law, taxpayers who itemized faced no limit on the amount of state and local tax they could deduct. The change meant that high-income taxpayers who live in states with high income taxes took a huge hit. Even so, most taxpayers gained at least a little because the standard deduction was raised substantially to make up for the SALT limit, and marginal tax rates were cut somewhat for the vast majority of taxpayers.
Of course, politicians from high tax states like New York and California don’t like the SALT limit. So why do I think it’s so good?
This is from David R. Henderson, “Don’t Trade SALT for Broccoli,” TaxBytes, Institute for Policy Innovation, August 3, 2023.
Read the whole thing, which is short.
By the way, I love broccoli. I’m using broccoli to stand for higher tax rates because my impression is that many people hate broccoli.