Study: SALT Cap Repeal Would Halve Tax Revenue From New Measures

By:
Chris Gaetano
Published Date:
Sep 20, 2021
A recent analysis has found that if the $10,000 cap on state and local tax deductions (SALT) were fully repealed, as some have been advocating, high income individuals would see their contributions to the multi-trillion dollar spending package cut by at least half, said Accounting Today

The $3.5 trillion spending plan carried a wide variety of tax measures aimed mostly at higher earners in order to fund the ambitious agenda. This includes raising the top income rate to 39.6 percent from 37 percent, a tax surcharge on some millionaires and a higher capital gains rate for the wealthy on investment proceeds. 

Accounting Today said that if the $10,000 cap were fully lifted, the top 1 percent of taxpayers, who earn at least $401,601, would see their after-tax incomes fall by 1.9 percent, versus 5 percent if the cap remained in place. Certain people, despite the spending bill's measures, might even find themselves with tax cuts, the study saying that those earning between $165,181 and $401,600 would see their incomes rise by 0.9 percent should the cap be eliminated, versus losing 0.3 percent of income should the cap stay where it is. 

The SALT cap has become a major divide between Democrats, who can little afford dissent when their majority is so thin. Those backing the repeal, mostly more conservative members of the party, have said they will not support the spending packages unless relief is part of the deal. Other more progressive party members, though, have said this essentially amounts to a giveaway to the rich, as it has generally been wealthier people who benefit more from the deduction. 

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