What is the SALT cap? What to know about Trump’s proposed tax deduction change
President-elect Donald Trump is reportedly open to raising the SALT limit, a provision of the tax code that overwhelmingly disadvantages wealthy households in blue states.
Before the Tax Cuts and Jobs Act, a law signed by Trump in 2017, the SALT deduction allowed taxpayers who itemized their deductions to subtract what they paid in state and local (SALT) taxes from their federal taxes.
Before 2017, there was no limit to the amount you could deduct, which meant wealthy individuals in high-tax states that provide more government services could reduce their federal taxable income by tens of thousands of dollars.
Trump’s bill only allowed taxpayers to deduct up to $10,000 in real estate, sales or income taxes paid to state and local governments.
This was a huge shift for many citizens, and at the time Democrats saw this as Trump’s revenge against people in blue states who did not vote for him in the 2016 election.
Before Trump’s tax reform, 91 percent of the benefits of the SALT deduction were claimed by California, New York, New Jersey, Illinois, Texas and Pennsylvania, according to the Tax Foundation.
But now, after a recent meeting with House Republicans from New York, California and New Jersey, Trump is said to be open to raising the $10,000 limit. Trump made huge gains in all three of these states in the 2024 election.
Rep. Mike Lawler of New York, who attended Saturday’s rally at Mar-a-Lago in Palm Beach, Florida, said Trump is “fully in favor of raising the limit.”
After a meeting on Saturday at his Mar-a-Lago resort, President-elect Donald Trump is reportedly open to raising the SALT limit. His administration could support a jump to $20,000
Republican Reps. Mike Lawler and Nicole Malliotakis, both from New York, attended the meeting and now say Trump favors “raising” or eliminating the cap
Representative Nicole Malliotakis, also from New York, said this The New York Post that Trump wants to “kill” the SALT cap.
“He said he understands the plight of New Yorkers who are being abused by our mayor and our governor, who treat them like ATMs, and that he wants to provide SALT relief,” Malliotakis said. “We have to figure out what that number is going to be.”
What the president-elect is not open to, according to reports, is completely abolishing the limit.
Bloomberg reported that Trump’s economic advisers have discussed expanding the limit to $20,000.
The clear reason Trump is against lifting the cap is that his administration wants to make more tax cuts that need to be offset.
Some of the tax cuts Trump discussed during his campaign included eliminating income taxes on tips, Social Security benefits and overtime.
Lifting the SALT cap is unpopular with some conservative Republicans from lower-tax states, who again argue that it disproportionately benefits taxpayers in Democratic states.
“Why would people in South Carolina subsidize the tax policies of California and New York? You’re going to have a hard time with that,” Republican Senator Lindsey Graham of South Carolina told Fox Business last week.
Republican Senator Lindsey Graham of South Carolina is not in favor of raising the SALT limit, something many elected Republicans in blue states disagree with him on
Lawler hit back at Graham and argued in his own performance Fox News that South Carolina is “a percentage of the largest recipients of federal dollars compared to other states.”
Trump will take office on January 20 with an extremely narrow Republican Party margin in the House of Representatives, with Republicans holding 219 seats and Democrats holding 215 seats.
This will soon drop to 217-215 after two lawmakers join the new Trump administration.
This means he will almost certainly have to continue negotiating with Republicans who favor raising the SALT ceiling if he wants to pass another large-scale tax cut.
Over the past four years, Democrats have made several attempts to eliminate or increase the SALT limit.
Their first attempt came in 2021, when the House of Representatives approved the Build Back Better plan. The bill increased the limit to $80,000 through 2031, but failed in the Senate.
A collection of blue states — including New York, Connecticut, Maryland and New Jersey — have also launched a legal challenge to the part of Trump’s tax bill that included the SALT cap.
The states argued that the cap improperly infringed on their taxability.
In April 2022, the Supreme Court declined to hear the case and gave no reason why.