Summary: Under current law, individuals can deduct up to $10,000 in state and local taxes (SALT) from taxable income through 2025, after which no limitation applies. The proposal would make two permanent changes to the deduction. First, it would set the maximum deduction value to $50,000. Second, it would introduce a phase-out range for the deduction: from $400,000 to $800,000 in AGI, the maximum deduction would decrease from $50,000 to $10,000.
We estimate the proposal would raise $355 billion in revenue over the 10-year budget window. In 2022, taxpayers in the top quintile of incomes would see 95 percent of the benefits from this policy. In 2026, when a deduction cap represents a tax increase relative to current law, nearly all of the additional tax burden would fall on the top 5 percent of taxpayers. After-tax incomes for the top 1 percent of taxpayers by income would decrease by more than 3 percent.
| 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | Budget window |
|---|---|---|---|---|---|---|---|---|---|---|
| -26.4 | -35.2 | -36.2 | -37.5 | 49.3 | 78.6 | 83.6 | 88.0 | 92.4 | 98.7 | 355.3 |
| Income group | Average tax change | Share with tax cut | Average tax cut | Share with tax increase | Average tax increase | Percent change in after-tax income | Share of tax change |
|---|---|---|---|---|---|---|---|
| Bottom quintile | $0 | 0.0% | -$20 | 0.0% | $0 | 0.0% | 0.0% |
| Second quintile | $0 | 0.3% | -$440 | 0.0% | $0 | 0.0% | 0.0% |
| Middle quintile | -$5 | 1.3% | -$520 | 0.0% | $0 | 0.0% | 0.4% |
| Fourth quintile | -$60 | 7.6% | -$755 | 0.0% | $0 | 0.1% | 4.3% |
| 80-90% | -$390 | 30.4% | -$1,280 | 0.0% | $0 | 0.3% | 14.1% |
| 90-95% | -$1,370 | 60.1% | -$2,285 | 0.0% | $0 | 0.8% | 24.8% |
| 95-99% | -$3,840 | 78.9% | -$4,870 | 0.0% | $0 | 1.3% | 55.6% |
| 99-99.9% | -$220 | 13.4% | -$1,660 | 0.0% | $0 | 0.0% | 0.7% |
| Top 0.1% | $0 | 0.0% | $0 | 0.0% | $0 | 0.0% | 0.0% |
| Income group | Average tax change | Share with tax cut | Average tax cut | Share with tax increase | Average tax increase | Percent change in after-tax income | Share of tax change |
|---|---|---|---|---|---|---|---|
| Bottom quintile | $0 | 0.0% | $0 | 0.0% | $0 | 0.0% | 0.0% |
| Second quintile | $0 | 0.0% | $0 | 0.0% | $0 | 0.0% | 0.0% |
| Middle quintile | $0 | 0.0% | $0 | 0.0% | $565 | 0.0% | 0.0% |
| Fourth quintile | $0 | 0.0% | $0 | 0.0% | $2,560 | 0.0% | 0.0% |
| 80-90% | $0 | 0.0% | $0 | 0.2% | $1,400 | 0.0% | 0.0% |
| 90-95% | $20 | 0.0% | $0 | 0.5% | $3,785 | 0.0% | 0.2% |
| 95-99% | $1,330 | 0.0% | $0 | 22.6% | $5,880 | -0.4% | 8.9% |
| 99-99.9% | $30,520 | 0.0% | $0 | 85.7% | $35,595 | -3.4% | 46.2% |
| Top 0.1% | $248,330 | 0.0% | $0 | 88.8% | $279,495 | -3.1% | 44.6% |