J.D. Foster
The tax provision generating the most puns involves the capped deduction for state and local taxes, or SALT. This is also the singularly absurd element surrounding extending President Donald Trump’s 2017 tax cuts.
Before the Trump tax cuts, about 30% of taxpayers itemized, and typically the deduction for SALT drove much of the decision. The Trump tax cuts nearly doubled the standard deduction while capping the SALT deduction at $10,000. According to the Tax Policy Center, now only about 9% of filers itemize.
Who are these residual itemizers? First, they are rich folk. After all, you need a lot of income for your itemized deductions to exceed the standard deduction.
Further, to hit the SALT cap you have to live in high-tax jurisdictions such as New York City or San Francisco.
Naturally, the rich people in these high-tax jurisdictions would rather pay less tax so they agitate for increasing or eliminating the SALT.
Why would any member of Congress not representing one of these jurisdictions tolerate any SALT deduction, let alone increase the cap?
Yet in the 2025 tax debate, raising the cap is very much on the table. The defenders of tax relief for the rich in high-tax jurisdictions have banded together in their shamelessness, and so passing a tax bill would require their votes if they succeed in their bluff.
Bluff? What bluff?
Take a step back. Letting the Trump tax cuts expire would impose a massive tax hike that would fall as heavily on the people in these high-tax states as elsewhere.
Consider New Jersey Democratic Rep. Josh Gottheimer, who recently introduced legislation eliminating the SALT cap. Trump’s near doubling of the standard deduction benefited working-class taxpayers in Gottheimer’s high-tax 5th New Jersey congressional district as much as it did those in low-tax jurisdictions.
Yet, now Gottheimer and friends are threatening to allow the standard deduction to fall and hammer his working-class constituents if a handful of rich folk don’t get another tax cut.
Gottheimer’s no fool. He knows if he let the Trump tax cuts expire, then he would be blasted back home, and rightly so. Even the New York Times, the favored paper of many rich taxpayers, has repeatedly criticized this proposal.
The SALT deduction defenders talk a good game, but when it comes to extending the Trump tax cuts they are bluffing even as their cards show face up on the table.
Try this. The current SALT cap is the same for single and married filers. Double the SALT cap for married filers with a catch. The full cap amount is only available for married filers making up to $80,000, about the medium family income, with half that amount for single filers.
Further, the cap would decline by 20% for every $10,000 in additional income thus disappearing entirely for married couples with $130,000 incomes.
Such a proposal would protect the middle class that Gottheimer pleads for while ending the relief for Mr. Big Bucks. Think the SALT caucus will go for this? Let’s see.
Further, once the bluff is called, then eliminating the SALT deduction should be on the table as a pay-for for additional tax relief elsewhere, tax relief that would apply across the country.
It is long past time to stop forcing the rest of the country to subsidize high-tax states. If you vote for big government, then you pay the full price for big government.
J.D. Foster is the former chief economist at the Office of Management and Budget and former chief economist and senior vice president at the U.S. Chamber of Commerce. He now resides in relative freedom in the hills of Idaho.
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