President Donald Trump and Republican lawmakers released details of their long-awaited tax reform overhaul on Wednesday, but while they say it is aimed at helping the middle class, some say average Americans will be dealt a financial blow by eliminating state and local tax deductions (SALT).
“The impact of eliminating SALT will not only be felt at the kitchen table, it will be felt in our states and local communities. This plan threatens necessary infrastructure investments and vital state and local public services, including education and public safety, that benefit all Americans,” Americans Against Double Taxation said in a statement.
SALT allows individuals to deduct state and local taxes on their federal returns. State and local taxes have been deductible since 1913.
Eliminating the popular deductions could increase federal revenue by $1.3 trillion over the next decade, according to the Tax Policy Center. However, as a result, about 24% of taxpayers nationwide would see an increase in taxes, the Tax Policy Center said. Those increases would be outsized for residents in high-tax states such as New York and California, where resident taxpayers would pay more than 30% of the tax increase from trashing the deduction. Additionally, individuals with incomes in excess of $100,000 would have the largest tax increase in both dollars and as a percentage of income – paying 90% of the increase associated with eliminating SALT.
Rep. Peter King (R-N.Y.) said on Twitter Wednesday that any tax reform package approved must not tax individuals in his state twice.
Gov. Andrew Cuomo (D-N.Y.), agreed, calling it “a bad deal for New York,” saying it would cost 3 million New Yorkers more than $17 billion.
Even U.S. Treasury Secretary Steven Mnuchin, who has lived in both New York and California, admitted on FOX Business on Thursday that it would be “a very bad thing” for him. However, he said it’s time to even the playing field among different states.
“I think we should get the federal government out of the business of subsidizing states. The federal government has no business subsidizing states from a tax standpoint,” Mnuchin told FOX Business’ Maria Bartiromo of Mornings with Maria.
Rep. Chris Collins (R-N.Y.) said, taking into account the entirety of the tax proposal, what taxpayers fork over to the government will ultimately even out.
"I bet you 98% of the people in my district are going to take the standard deduction," Collins said, according to Business Insider. "So they’re not going to lose anything."
President Donald Trump has insisted his plan is aimed at boosting the financial position of the working class, saying in a speech on Wednesday in Indiana it was time to begin “a middle-class miracle.”
On Wednesday, a senior administration official said U.S. workers will benefit largely from the corporate tax rate increase, which will raise equity prices and lead to fuller pension plans. They will also receive an individual tax cut, with the three set brackets at 12%, 25% and 35%. The plan will also nearly double the standard deduction.