President-elect Donald Trump made waves on Saturday by telling House Republicans to negotiate a “fair number” for the $10,000 cap on state and local tax (SALT) deductions. This controversial cap has been a hot topic, especially for residents of high-tax states like New Jersey, New York, and California.
A group of over a dozen lawmakers from these states gathered with Trump at his Mar-a-Lago resort to discuss SALT, as well as other important issues like congestion pricing. Trump, during his presidential campaign, promised to lift the cap and bring some much-needed relief.
In a post on the social media platform Truth Social, Trump said, “I will turn it around, get SALT back, lower your taxes, and so much more.” He’s clearly set on changing things. Rep. Nicole Malliotakis, a Republican from New York, shared with Politico after the meeting that Trump is determined to increase the deduction, recognizing that taxpayers are feeling the pressure from their local governments. “He wants us to work on what would be a fair number,” she said.
The SALT deduction has been around since 1913, allowing taxpayers to reduce their taxable income by the amount they pay in state income taxes and local property taxes. Back in 2017, when Trump signed a tax law that introduced the $10,000 cap, it caused quite a stir, particularly in states with high property taxes. Critics argued it unfairly targeted Democratic-leaning states.
Take New Jersey, for example. The average property tax bill there is already close to $10,000, and in some areas, like Bergen County, it’s much higher. This cap has hit homeowners hard, essentially raising their taxes. Before the cap was introduced, the average SALT deduction in New Jersey was more than $18,000, with many residents earning between $100,000 and $200,000 annually.
Efforts to lift the SALT cap haven’t had much luck over the years. Some Democrats believe the deduction mainly benefits the wealthy, while many Republicans from low-tax states oppose any increase.
One earlier proposal to double the cap to $20,000 was estimated to cost the federal government $22 billion over a decade. More recently, a report estimated that doubling the SALT cap for married couples would reduce revenue by $170 billion—on top of the already massive $3.9 trillion deficit from extending other tax cuts. To add to the debate, it’s estimated that 94% of the benefit would go to households earning over $200,000 per year.
The question remains: Will lawmakers find a fair solution to the SALT cap, or will it continue to divide the nation’s tax policy? Time will tell!
