Taxation (is theft) in the news

[Diogenes]

Let's get down to brass tacks on tax.



The State and Local Tax (SALT) deduction allows U.S. taxpayers who itemize their federal returns to subtract eligible state and local taxes, primarily property, income, and sales taxes, from their taxable income.

What does that mean?

I'm glad you asked.

SALT is a federal subsidy for high-tax jurisdictions

SALT deductions transfer a portion of blue-state tax burdens to federal taxpayers nationwide, and they insulate high-tax state residents (especially higher earners) from the full fiscal consequences of the policies enacted by their elected officials.

This is not a fringe opinion; it is a straightforward economic and political reality acknowledged across the ideological spectrum, including by many blue-state Democrats who defend SALT while privately recognizing the incentive distortion.

Prior to 2018, there was no cap, but the 2017 Tax Cuts and Jobs Act (TCJA) imposed a $10,000 annual limit ($5,000 for married filing separately), which disproportionately affected residents of high-tax states like New York, California, New Jersey, and Connecticut. This cap was set to expire after December 31, 2025, potentially reverting to unlimited deductions.

However, on July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBB), extending and modifying TCJA provisions.

Blue states (e.g., Democrat-dominated with high taxes like CA, NY, NJ, IL, CT) claim ~78% of SALT benefits due to their elevated property and income taxes.

High-tax urban centers (e.g., NYC, San Francisco, Chicago, Los Angeles) amplify state-level effects, as property taxes often exceed $20,000 for median homes in affluent areas. Cities rely on these taxes for ~30–50% of revenue (e.g., NYC: $30B+ annually).

• Housing Market: Temporary cap lift stabilizes values in high-tax suburbs (e.g., Westchester, NY; Marin County, CA), where pre-2018 caps depressed prices by 1–3% via reduced buyer appeal.
• Migration and Equity: Eases "tax flight" to low-tax red states (e.g., FL, TX); low/middle-income renters see minimal gains since they aren't directly affected by property taxes.
• Local Services: More federal relief indirectly sustains city spending on infrastructure/housing without property tax hikes

Bottom line: Every dollar deducted under SALT is a dollar the federal government cannot tax, shifting the cost of state/local spending onto the national tax base.

Critics call it a "blue state bailout," while advocates argue it counters federal overreach on local taxes.

Any questions, @EdwinA?

 

[Uncensored2008]

Bingo - SALT is welfare for millionaires.

 

[Diogenes]

Bingo - SALT is welfare for millionaires.

In 2023, ~91% of SALT benefits went to the top 20% of earners; ~60% to the top 5%.

Blue states (CA, NY, NJ, CT, IL, MA) claim ~78% of total SALT deductions despite having ~40% of U.S. population.

A $40,000 SALT deduction at the 37% federal bracket equals $14,800 in reduced federal taxes.

SALT is a tax break for the rich.

As I said, every dollar deducted under SALT is a dollar the federal government cannot tax, shifting the cost of state/local spending onto the national tax base.

 

[FastLane]

Let's get down to brass tacks on tax.



The State and Local Tax (SALT) deduction allows U.S. taxpayers who itemize their federal returns to subtract eligible state and local taxes, primarily property, income, and sales taxes, from their taxable income.

What does that mean?

I'm glad you asked.

SALT is a federal subsidy for high-tax jurisdictions

SALT deductions transfer a portion of blue-state tax burdens to federal taxpayers nationwide, and they insulate high-tax state residents (especially higher earners) from the full fiscal consequences of the policies enacted by their elected officials.

This is not a fringe opinion; it is a straightforward economic and political reality acknowledged across the ideological spectrum, including by many blue-state Democrats who defend SALT while privately recognizing the incentive distortion.

Prior to 2018, there was no cap, but the 2017 Tax Cuts and Jobs Act (TCJA) imposed a $10,000 annual limit ($5,000 for married filing separately), which disproportionately affected residents of high-tax states like New York, California, New Jersey, and Connecticut. This cap was set to expire after December 31, 2025, potentially reverting to unlimited deductions.

However, on July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBB), extending and modifying TCJA provisions.

Blue states (e.g., Democrat-dominated with high taxes like CA, NY, NJ, IL, CT) claim ~78% of SALT benefits due to their elevated property and income taxes.

High-tax urban centers (e.g., NYC, San Francisco, Chicago, Los Angeles) amplify state-level effects, as property taxes often exceed $20,000 for median homes in affluent areas. Cities rely on these taxes for ~30–50% of revenue (e.g., NYC: $30B+ annually).

• Housing Market: Temporary cap lift stabilizes values in high-tax suburbs (e.g., Westchester, NY; Marin County, CA), where pre-2018 caps depressed prices by 1–3% via reduced buyer appeal.
• Migration and Equity: Eases "tax flight" to low-tax red states (e.g., FL, TX); low/middle-income renters see minimal gains since they aren't directly affected by property taxes.
• Local Services: More federal relief indirectly sustains city spending on infrastructure/housing without property tax hikes

Bottom line: Every dollar deducted under SALT is a dollar the federal government cannot tax, shifting the cost of state/local spending onto the national tax base.

Critics call it a "blue state bailout," while advocates argue it counters federal overreach on local taxes.

Any questions, @EdwinA?

BINGO IT IS UNFARE TO STATES THAT DO NOT HAVE STATE INCOME TAX LIKE FLORIDA AND TEXAS

 

[Diogenes]

High-tax policies (e.g., generous pensions, expansive social programs, high public sector wages) are cheaper to sustain when part of the cost is offset by federal tax deductions.Example: New York vs. Florida

• New York (with SALT): State + local taxes paid = $50,000; Federal SALT deduction (2025 cap: $40k) = $40,000; Federal tax savings (37% bracket) = $14,800; Net after-federal-tax cost = $35,200.
• Florida (no state income tax): State + local taxes paid = $25,000 (mostly property/sales); Federal SALT deduction (2025 cap: $40k) = $25,000; Federal tax savings (37% bracket) = $9,250; Net after-federal-tax cost = $15,750.

The New Yorker pays 2.2x more in state/local taxes but only 2.0x more after federal offset.

SALT narrows the gap, making high-tax policies less painful for the voters who support them.

This creates a hazard: Blue-state lawmakers can promise generous benefits.

High-income voters in blue states and cities (who itemize) feel less pain.

The rest of the country pays part of the bill.

 

[Diogenes]

Next time a JPP leftist says Trump gave "the rich" a tax cut, hit 'em with this:

1. Low/middle-income in all states pay more via deficits or higher future taxes, but don't benefit (few itemize).
2. Blue-state high earners pay less and benefit bigly. They get a federal tax cut, according to the CBO (2021).
3. Eliminating the SALT cap would increase deficits by $1 trillion over 10 years.

 

[Diogenes]

The last time the SALT deduction was completely uncapped (between 1960 and 1986), blue state/blue city/blue county taxes grew 25% faster than the economy.

After the 1986 reform capped deductions, blue state tax increases slowed.

Fiscal discipline improved in many blue high-tax states, cities and or counties.

Lesson: When high-income Democrat voters bear the full cost of their lawmaker's tax policies, they demand more accountability, or they move.

 

[EdwinA]

Any questions, @EdwinA?

Why would I have questions? I've said before high tax states shouldn't get a deduction from their Fed taxes.

In any case, I oppose any payroll taxes, Fed, state, or local, period. Wages aren't real income, they're barter, an exchange of equal value, in the strict economic sense. Hourly pay is trading cash for time served; there is no capital gains or income generated, except for the employer and corporate owners. It's stupid to tax wages. They get taxed on consumption already, as well as on savings, if any.

 

[Diogenes]

Here's what SALT deductions do:

• Transfer blue-state tax burdens to federal (i.e., national) taxpayers.
• Insulate wealthy blue-state residents from the full cost of progressive policies they vote for.
• Distort incentives, encouraging higher state and local spending.
• Reduce political accountability.

If Democrats want expensive state and local government, they should make their voters pay their fair share pay for it.

Sending part of the bill for runaway spending to federal taxpayers is unfair.

 

[T. A. Gardner]

Bingo - SALT is welfare for millionaires.

SALT is a smoke screen for the disasters of big government and socialism at the state and local level.

 

[Diogenes]

SALT is a smoke screen for the disasters of big government and socialism at the state and local level.

I agree.

1. Phase out SALT entirely over 5–10 years.
2. Replace with targeted relief for middle-income homeowners via expanded standard deduction or refundable credits, without subsidizing million-dollar property taxes in blue states.

 

[T. A. Gardner]

I agree.

1. Phase out SALT entirely over 5–10 years.
2. Replace with targeted relief for middle-income homeowners via expanded standard deduction or refundable credits, without subsidizing million-dollar property taxes in blue states.

Easier. Just set SALT values to those of the state with the lowest tax rates for that stuff that is now deductible. It'll quickly become a race to the bottom. Besides, if we did that it would be "Fair and equal," something the Left always says things should be. Everybody in every state gets the same deductions if the lowest values are the ones setting the rates.

 

[Jake Starkey]

Libertarianism is a shit philosophy.

 

[Diogenes]

Easier. Just set SALT values to those of the state with the lowest tax rates for that stuff that is now deductible. It'll quickly become a race to the bottom. Besides, if we did that it would be "Fair and equal," something the Left always says things should be. Everybody in every state gets the same deductions if the lowest values are the ones setting the rates.

What chance would that have of passing Congress?

The State and Local Tax (SALT) deduction has been a staple of the U.S. federal income tax system since its inception, allowing itemizing taxpayers to subtract certain state and local taxes, such as property, income, and sales taxes, from their federal taxable income.

For over a century, it faced minimal restrictions, but phaseouts and caps emerged as tools to limit benefits for higher earners and control federal revenue.

Below is a chronological overview of key developments in SALT phaseouts and limitations, drawing from legislative history and tax policy evolution.

This focuses on federal changes affecting individuals, as the deduction primarily impacts personal filers.

Origins: Unlimited Deduction (1913–1986)

The SALT deduction traces back to the Revenue Act of 1913, which implemented the 16th Amendment authorizing the modern federal income tax. It allowed deductions for "all national, State, county, school, and municipal taxes paid within the year," excluding those for local benefits. This unlimited approach stemmed from principles of federalism, preventing federal overreach into state affairs, and avoiding double taxation on income already taxed at the state level. No phaseouts existed; the deduction was fully available to itemizers regardless of income.

This era saw no significant debate or restrictions, with the benefit accruing broadly but increasingly to wealthier households in high-tax states as incomes rose post-World War II.

First Phaseout: Pease Limitation (1991–2012)

The initial meaningful curb on SALT came with the Omnibus Budget Reconciliation Act of 1990, effective for tax years beginning in 1991.

This introduced the "Pease limitation," named after the late Rep. Donald Pease, a Democrat, which indirectly phased out itemized deductions, including SALT, for higher-income taxpayers.

It reduced the value of all itemized deductions by 3% of the amount by which adjusted gross income (AGI) exceeded a threshold (initially $100,000 for singles and $150,000 for joint filers, inflation-adjusted thereafter). The phaseout topped out at 20% overall but never fully eliminated deductions.

For SALT specifically, this meant a partial erosion for upper-middle and high earners, targeting fiscal equity amid rising deficits. The provision lapsed briefly after 2009 but was reinstated through 2012 under the American Taxpayer Relief Act of 2012, affecting about 20–30% of itemizers at its peak.

Strict Cap and Repeal of Prior Limits (2018–2024)

Under the Tax Cuts and Jobs Act (TCJA) of 2017, signed by President Trump, the SALT deduction underwent its most dramatic overhaul, effective for 2018 through 2025.

The Pease limitation was repealed entirely, but a new hard cap replaced it: $10,000 total for state and local taxes ($5,000 for married filing separately).

This flat limit applied universally to itemizers, regardless of income, creating a de facto phaseout for those paying more than $10,000 in SALT (common in high-tax states like New York, California, and New Jersey).

No income-based thresholds modulated it, but the cap disproportionately hit higher earners who previously deducted larger amounts—averaging over $20,000 pre-2018.

The change reduced SALT claims from 31% of returns in 2017 to just 9% by 2022, while raising federal revenue by an estimated $1.3 trillion over a decade.

Democrats argued it penalized blue states, while Republicans viewed it as curbing a regressive subsidy for the affluent (88% of benefits went to those earning over $100,000 in 2014).

Current Phaseouts: Temporary Expansion with Income Tiers (2025–2029)

As of November 2025, the landscape was shifted dramatically with the One Big Beautiful Bill Act (OBBBA), signed by President Trump on July 4, 2025. This legislation temporarily supersedes the TCJA's impending 2026 expiration, raising the SALT cap to $40,000 ($20,000 for married filing separately) starting in tax year 2025.

However, it reintroduces income-based phaseouts to prevent unlimited benefits for the ultra-wealthy, using modified adjusted gross income (MAGI, essentially AGI plus certain foreign exclusions).

The structure is:

• Full $40,000 cap available for MAGI up to $500,000 ($250,000 for married filing separately).
• Gradual reduction above $500,000, decreasing by 30% of the excess MAGI amount until hitting a floor.
• Full phaseout to the pre-OBBBA $10,000 ($5,000 for married filing separately) at MAGI of $600,000 ($300,000 for married filing separately).

Thresholds index upward by 1% annually from 2026 ($505,000/$252,500 start), and the entire expansion sunsets after 2029, reverting to the TCJA's $10,000 cap in 2030 unless extended.

This creates a "SALT torpedo" effect in the $500,000–$600,000 range, where effective federal rates can spike to 45.5% due to the rapid deduction loss.

The change offers relief to middle-and upper-middle earners in high-tax areas but maintains guardrails against deficit growth, with pass-through entities (like S-corps) largely exempt from new restrictions.

This evolution reflects ongoing tensions. SALT started as a neutral anti-double-tax tool but has become a flashpoint for regional equity, revenue needs, and class-based policy debates.

Future changes loom in 2029–2030, potentially tied to broader tax reform.