Opinion: End of Maximum SALT Discounts May Help California Homeowners, But Progressives Oppose

Property tax bills. Image courtesy of the San Diego County Tax Collection Office

The House of Representatives has passed President Joe Biden’s $1.85 trillion social policy package, but he faces a tough burden in an evenly divided Senate.

The White House and Senate Democratic leader Chuck Schumer are caught up in the demands of two centrist Democratic senators to cut the package and warnings from the left, including Senator Bernie Sanders, that they may turn against the legislation if it is watered down too much.

One specific sticking point is something that would have multi-billion-dollar implications for California — partial abolition of the $10,000 cap on income tax deduction for state and local taxes, called SALT.

The cap, part of a Republican tax reform signed by former President Donald Trump in 2017, has hit hard-hitting states like New York and California. It indirectly raised federal taxes on high-income residents, and state officials loudly encouraged them to immigrate to other states with lower taxes or otherwise reduce their tax exposure.

California Franchise Tax Board, its income tax collection agency, Estimated in 2018 The SALT deduction limit has cost Californians an additional $12 billion annually in federal taxes.

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