Former President Donald Trump vowed Tuesday to restore the state and local tax deduction that he previously clawed back during his first term in hopes of appealing to blue New York ahead of his Long Island rally.
The SALT deduction enables taxpayers to deduct their state and local taxes from the adjusted gross income on their federal income taxes.
Trump, 78, previously signed the Tax Cuts and Jobs Act of 2017, which capped SALT at $10,000, disproportionately affecting blue states with higher taxes, like the Empire State.
“I will turn it around, get SALT back, lower your Taxes, and so much more. I’ll work with the Democrat Governor and Mayor, and make sure the funding is there to bring New York State back to levels it hasn’t seen for 50 years,” Trump pledged on Truth Social.
Donald Trump is trying to boost his appeal to New Yorkers. REUTERS
Queens-born Trump has fixated on flipping New York State this election cycle. The 45th president declared that his rally at Nassau Coliseum on Long Island Wednesday night “will be a really big deal.”
“It will be PACKED with Patriots! We have a real chance of winning, for the first time in many decades, New York,” he added on Truth Social. “WHAT THE HELL DO YOU HAVE TO LOSE? VOTE FOR TRUMP!”
New York and New Jersey pols have long set their sights on scrapping or dramatically rolling back the cap on the SALT deduction to provide relief to their constituencies.
How would this affect New Yorkers?
For an individual making $100,000 in 2023 who paid $20,500 in state, local, property and other eligible taxes, eliminating the SALT cap could save them roughly $2,300 on their federal tax bill, according to a Post estimate.
That does not account for other potential deductions. Exact tax bills vary based on an individual’s situation.
Individuals with higher incomes would benefit more from the elimination of the SALT cap.
But for the vast majority of taxpayers, lifting the SALT cap would likely be a wash to them personally, as most Americans don’t itemize and instead opt for the standard deduction. The IRS estimated that in 2018, about 87.3% used the standard deduction.
Still, it could benefit New York’s economy.
Elise Stefanik had been critical of the prior Republican bill that capped the SALT deduction. AP
Former New York Gov. Andrew Cuomo called for nixing the SALT cap before leaving office, arguing it would bolster the Empire State’s economy and provide tax relief, thus reducing the incentives for high-income earners to leave.
“Repealing SALT would lower the effective tax rate on the state’s top earners by 37%,” he said back in 2021. “The state’s new, top 10.9% tax rate becomes an effective 6.9% tax rate.”
New York Republicans in Congress have long pushed for rolling back the SALT cap, as have many Empire State and Garden State Democrats.
Back in 2021, Democrats such as Rep. Josh Gottheimer (D-NJ) pushed for raising the cap, which at one point was one of the highest costing aspects of the so-called “Build Back Better” plan, during some iterations of it. That proved controversial within the party.
Ultimately, Democrats dropped that plan and opted for the scaled-back Inflation Reduction Act.
In the weeds
Back in 2017, when Republicans had control of both chambers of Congress, they imposed the $10,000 cap on the SALT deduction to reduce the deficit from their corporate tax reform.
They did so amid part of a broader push to simplify the tax code.
During the time of passage, several New York reps such as future House Republican Conference Chairwoman Elise Stefanik (R-NY) balked at the reform bill, due to gripes with the SALT cap.
Because Republicans lacked a fillibuster-proof majority in the Senate and support from Democrats, they needed to rely on a process known as Reconciliation to finagle corporate tax reform through the upper chamber.
Reconciliation requires that legislation cannot add to the deficit after a 10-year period, due to the Byrd Rule.
Former House Speaker Paul Ryan had championed tax simplification during the crafting of the reform package in 2017. Chip Somodevilla
As a result, some provisions of the 2017 tax reform package, such as the SALT cap are set to expire at the end of 2025, which could reduce federal revenue by $139 billion, per the nonpartisan Joint Committee on Taxation.
Trump’s tax-cutting spree
Throughout his 2024 campaign, Trump has vowed to slash taxes dramatically in some areas, including by eliminating taxes on tips and on Social Security.
Many of those policy proposals appear to target key blocs of voters, like workers in service-heavy Nevada and older voters, all of whom could be key to him winning on Nov. 5.
The 45th president has been short on details about how some of those specific tax cuts would work and how he’d pay for them. At one point, Trump dangled broad-based tariffs between 10% and 20% on foreign imports as well as 60% tariffs on China.
The Libertarian-leaning Manhattan Institute’s senior fellow Brian Riedl has estimated that Trump’s slate of tax reductions could boost deficits by $11 trillion over a decade.
The 45th president has been proposing a slew of tax cuts if he wins back the White House. REUTERS
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Publish date : 2024-09-17 11:38:00
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