Tax plan shake-up
GOP weighs raising SALT cap to $40,000, which would help NJ
By: Daniel Munoz
NorthJersey.com
USA Today Network - New Jersey
..... Republican lawmakers are reportedly considering raising the current $10,000 state and local property tax deduction to $40,000, up from a previous proposal of $30,000, as part of a sweeping GOP-led tax plan.
.....
That's according to multiple news reports, including Politico, The Hill and Axios, which cited individuals familiar with the private agreement. The deduction, taken on federal income taxes, would be limited to individuals making up to $500,000 a year, the outlets reported.
..... Known formally as the state and local tax deduction, or SALT, there used to be no limit on the deduction, but lawmakers limited to $10,000 as part of the 2017 Tax Cuts and Jobs Act.
..... Critics say the cap has targeted - and hurt residents in - often Democratic leaning states with high property taxes, such as New Jersey, California and New York. Average property tax in some New jersey towns in 2024 were more than double the $10,000 cap, so homeowners could not claim the full property tax payment as a deduction their federal income tax.
..... Members of the so-called SALT Caucus have rejected the plan, saying there should not be any cap at all.
..... One such member, Democratic Representative Laura Gillon from Long Island, introduced such a proposal on May 20. [2025] Bloomberg reported that President Donald Trump urged Republicans from New York and other high-tax states to wait to try to raise the SALT limit further until after Congress is dun with the tax legislation.
..... Before a meeting with Republican lawmakers on May 20, [2025] Trump reversed his past position, now saying he does not support an even higher cap on the SALT deduction. "We don't want to benefit Democrat governors," Trump told reporters ahead of the meeting.
..... North Jersey Democratic Representatives Mikie Sherrill and Josh Gottheimer, who are both running for governor, previously rejected a $30,000 cap.
..... Gottheimer previously said he wanted a full repeal of the cap. Sherrill said previously that she wanted the deduction raised to $100,000 for single filer or $200,000 for married couples filing jointly.
..... In a Tuesday [05/20/2025]
statement, Gottheimer called efforts to raise the cap "a weak attempt to clean up the mess that Donald Trump created."
..... The GOP proposal would cut taxes and extend Trump's tax cut due to expire this year. [2025] To pay for that, Republicans would tighten social safety net benefits for the poor, Reuters reported.
..... The SALT deduction lets people reduce the amount of their annual income that can be taxed by the federal government by subtracting how much the pay in state income taxes and local property taxes. The deduction has existed since 1913, the Congressional Research Service said.
..... The current $10,000 cap on the deduction is set to expire at the end of this year, [2025] along with other tax cuts and provisions of the 2017 tax bill.
..... Progressives, including Senator Bernie Sanders, a Vermont independent who caucuses with Democrats, have decried the SALT deduction as a tax break for the wealthy.
..... Most of the tax relief from lifting the SALT can for instance, would go to households earning between $200,000 and $500,000, said a February 2024 report from the Tax Foundation, a center-right think tank in New York City.
.....
The nonpartisan Committee for a Responsible Federal Budget said the proposed repeal of the $10,000 SALT cap "would be costly, distortion, and regressive."
..... "Most households don't have $10,000 in state and local taxes," said Peter Chen, an analyst with New Jersey Policy Perspective, a progressive think tank, "When you think about who's going to benefit the most from lifting the cap, it's the people who are in the highest income brackets."
..... Defenders f the SALT deduction argue the most of those who benefit are middle-income homeowners, even if the largest individual savings would go to the wealthiest.
..... The progressive Institute on Taxation and Economic policy said in 2021 that 80% of the 1.9 million New Jersey residents who would see a benefit from removal of the cap had average incomes of up to $216,000.
..... Most of the tax increase from restricting the SALT deduction affected "cops, firefighters, and teachers," Gottheimer said in an interview last year. [2024]
..... "This is a middle-class issue," he added.