Tuesday, March 5, 2019
Taxpayers in high-tax states such as New York, California, and New Jersey are flinching from the pinch of the $10,000 cap on deductions for state and local taxes, or SALT. Many legislators are attempting to repeal the cap as citizens in those states are now limited on how much they can write off.
The belief for those that are critics of the cap is that it is meant to punish those in high-tax states and the President has stated that he is willing to talk about altering the cap. The likelihood of him actually changing it may be low, however, because the SALT cap pays for much of the tax cuts of [reform], according to Barry Horowitz, partner and team leader of state and local tax in the New York office of accounting firm Withum Smith+Brown.
Even the upper-middle class has felt the pain, both in states with high property taxes such as Texas and high income tax states like New Jersey and California. Susan Carlisle, a CPA in Los Angeles say that the SALT will “will soon impact the real estate markets in those states as people realize that their expensive homes are now a whole lot less affordable than they have been." Conversations dealing with leaving the high-tax states for states with lower-tax states are becoming more and more commonplace.
Critics of repeal claim it would result in reduced federal revenue and benefit the wealthiest income earners; others say that the deduction was a major source of tax fairness for high-taxed states.
See Jeff Stimpson, All Levels of Upper Wealth Feeling Acute SALT Cap Pain, Financial Advisor, February 25, 2019.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.