Majority of U.S. Taxpayers to Reap No Benefits from SALT Deduction, Economists Claim
President Donald Trump's tax bill, recently signed into law, has increased the State and Local Tax (SALT) deduction cap from $10,000 to $40,000, a move that experts argue primarily benefits high-income households while providing limited relief to middle-income and average Americans.
**Impact on High-Income Households:**
The bill allows taxpayers in high-tax states to deduct more of their state and local taxes from their federal taxable income, effectively lowering their overall tax burden. Wealthy owners of pass-through businesses can avoid the SALT cap entirely by using state-allowed loopholes to pay their state and local taxes through their firms, allowing them to fully deduct these taxes. About 36 states allow this strategy, and the Senate bill maintains this exemption, thus benefiting very wealthy business owners extensively.
**Impact on Middle-Income and Average Americans:**
Middle-income taxpayers gain modestly from the bill; estimates suggest a typical middle-income family might see a yearly increase of $500 to $1,000 in tax savings, translating to roughly $35 to $70 more per pay period. However, the SALT cap increase primarily helps those living in high-tax states with higher incomes and property values. Most middle-income taxpayers in lower-tax states see little benefit because their state and local taxes tend to be below the original $10,000 cap.
**Summary:**
| Group | Effect of Increased SALT Cap | Additional Notes | |-----------------------|--------------------------------------------------------------------|------------------------------------------------------| | High-Income Households | Major tax savings due to higher cap and loopholes for businesses | Some can fully deduct SALT via pass-through entities | | Middle-Income Families | Moderate benefit; small increase in take-home pay | Benefits mostly for those in high-tax/high-property-value states | | Average Americans | Limited direct benefit from SALT cap increase | Overall modest relief from other parts of the bill |
In conclusion, **raising the SALT deduction cap primarily favours high-income taxpayers**, especially those in high-tax states and business owners using pass-through entities, while **middle-income Americans see comparatively minor gains** mostly if they reside in high-tax areas. The bill's overall tax relief for middle-class families includes other provisions like expanded child tax credits and permanent extensions of some deductions, but the SALT increase itself mainly boosts benefits for wealthier households.
The raising of the SALT deduction cap primarily benefits high-income taxpayers, particularly those in high-tax states and wealthy business owners using pass-through entities, as they can fully deduct their state and local taxes. On the other hand, middle-income Americans see comparatively minor gains, mainly if they reside in high-tax areas, with a modest increase in their take-home pay. For average Americans, the direct benefit from the SALT cap increase is limited, but they may find overall modest relief from other provisions in the bill. In the realm of finance and politics, general-news outlets are highlighting the disparities in the distribution of the tax savings associated with the SALT cap increase between high-income households and middle-income families.
