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Business & Economy

Business & Economy

The Big Story

SALT cheat sheet: Key hurdle to Trump's tax plan

Republicans’ tax-and-spending cut package faces a number of hurdles in its path to President Trump’s desk, but the state and local tax (SALT) deduction cap could be the steepest.

© Mattie Neretin

Tax writers on the House Ways and Means Committee have offered to raise the cap to $30,000 for joint filers making up to $400,000 a year. But suburban Republicans from higher-tax blue states have said that number isn’t going to cut it and are threatening to spike the entire bill if they don’t get the increase they want to see.

Here’s some of the lowdown on the key hurdle:

What is the SALT cap? SALT is a tax break that lets taxpayers deduct part of what they owe in state and local taxes from their federal tax return. Prior to 2017, the deduction was unlimited, but the tax reforms in that year capped it at up to $10,000.

Is there effective SALT relief in another part of the tax code? The Republican tax bill extends an increased cutoff for the alternative minimum tax (AMT) — another tax provision for wealthy taxpayers. The boosted AMT threshold is very expensive, costing more than $1.4 trillion through 2034. Altogether, the tax portion of the GOP bill is set to cost $3.8 trillion over the next decade, less than the $4.5 trillion limit that GOP tax writers had set for themselves.

The geopolitics of SALT — the ‘donor state’ and ‘taker state’ argument: SALT is such a touchy issue in part because it is a tax break that benefits wealthier taxpayers more, and Republicans in poorer parts of the country don’t think they should have to pay it. Nationwide, almost all people making more than $200,000 claim a SALT deduction, according to the National Association of Realtors. That’s fewer than 15 percent of U.S. households, according to census data. For people making less money, use of SALT falls off sharply.

Tobias Burns has more details here.

Welcome to The Hill’s Business & Economy newsletter, I'm Aris Folley — covering the intersection of Wall Street and Pennsylvania Avenue.

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