SALT Deductibility Act
- Sponsor
- Rep. Garbarino, Andrew R. [R-NY-2]
- Committees
- Ways and Means Committee (primary)
- Last action
- Jan 15, 2025
Bottom line
The bill eliminates the $10,000 cap on the federal deduction for state and local taxes, primarily benefiting high-income earners and residents in high-tax states.
What it actually does
This bill repeals the $10,000 limitation on the deduction for State and local taxes (SALT) for federal income tax purposes, which was established by the Tax Cuts and Jobs Act of 2017. By striking paragraph (6) from Section 164(b) of the Internal Revenue Code of 1986, it would allow taxpayers to fully deduct their state and local property, income, and sales taxes without any federal cap. The change would apply to taxable years beginning after December 31, 2024.
Proponents argue
Proponents argue that the SALT cap imposes a form of 'double taxation' on taxpayers, as they are taxed by both state and federal governments on the same income without full deduction. They contend that restoring full deductibility would provide tax relief to middle-class families in high-tax states, make these states more competitive, and uphold a long-standing principle of federal tax law. They also argue it would alleviate financial burdens on homeowners and reduce disincentives for states to fund public services through local taxation.
Opponents contend
Opponents argue that repealing the SALT cap would disproportionately benefit wealthy individuals and corporations, as higher earners are more likely to itemize deductions and have state and local tax burdens exceeding $10,000. They contend that it would exacerbate income inequality, significantly increase the federal deficit, and primarily serve as a tax cut for the rich in already affluent areas. Critics also suggest that the original cap was a necessary measure to offset other tax cuts and encourage fiscal responsibility at the state and local levels.
The bill text is extremely short and straightforward, making it highly accessible for any reader to understand its direct legislative action.
Section 2(a)
Repeal of Limitation on Deduction for State and Local Taxes
This provision amends Section 164(b) of the Internal Revenue Code of 1986 by removing paragraph (6). Paragraph (6) is the specific statutory language that currently imposes a $10,000 limitation on the amount of state and local taxes (SALT) that individuals can deduct from their federal taxable income. Its repeal means that taxpayers would once again be able to deduct the full amount of state and local property, income, or sales taxes they paid.
Supporters argue
Supporters argue that repealing the cap restores a fundamental principle of tax fairness, preventing 'double taxation' and providing relief to taxpayers, particularly in states with high property and income taxes. They contend that the cap unfairly targeted certain states and their residents, many of whom are middle-class homeowners.
Critics contend
Critics contend that the repeal primarily benefits the wealthiest Americans and would significantly increase the national debt. They argue that the original cap was a progressive measure, ensuring that the highest earners contributed more to federal revenue, and that its repeal would be a regressive tax cut.
Tradeoffs
The provision balances the desire to reduce the tax burden on certain taxpayers, particularly in high-tax states, against concerns about federal revenue loss and the distributional equity of tax benefits, as the largest benefits accrue to higher-income households.
Section 2(b)
Effective Date
This provision specifies that the repeal of the SALT cap will take effect for taxable years beginning after December 31, 2024. This means that taxpayers would be able to claim the full deduction for state and local taxes paid starting with their 2025 tax returns, which are typically filed in 2026.