Vice President Kamala Harris, the Democratic presidential nominee, may be the SALT champion that wealthier taxpayers in high-tax states such as California and New York have been looking for, according to Mark Quinn, Cetera Financial Group's director of regulatory affairs.
Former President Donald Trump enacted a $10,000 cap on state and local tax deductions to pay for his 2017 tax cuts.
But in some counties in high-tax states such as New Jersey and New York, tax bills for state and local income taxes can be more than twice the limit, according to the Tax Foundation.
The controversial SALT cap is slated to sunset at the end of 2025, along with the rest of Trump’s 2017 tax reforms.
“I think it's reasonable to assume Harris might pursue SALT relief for people in high income- and property-tax states simply because they’re her political base,” Quinn said.
If Harris wins, she can expect “huge pressure from Democrat legislators in states like New York and California and all the higher-tax traditional Democrat strongholds to repeal the SALT limit. Many congressional candidates for Congress in New York and California are saying, ‘this is my single biggest issue if I get elected. I’m going to spend all my time working to reinstate the SALT deduction,” Quinn said.
Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries have said letting the SALT tax cap expire is a major priority for them.
“We Democrats, as long as I’m leader, when state and local deductibility expires, it will be gone,” Schumer told reporters during the Democratic National Convention in Chicago.
In contrast, Republican presidential nominee Trump “was not a big fan of the voters in California or New York because they didn't vote for him, so I can foresee him not caring as much about the wealthier voters in high-tax states,” Quinn said. “But for Harris, obviously her backing comes from blue states such as California, New York, New Jersey, the upper Midwest and the West Coast.”
The problem with allowing the SALT cap to expire, however, “is all of the sudden you’re giving away a lot of tax revenue,” Quinn said.
Capping the SALT deduction at $10,000 raised hundreds of billions of dollars in tax revenue Republicans needed to offset the cost of lower tax brackets for those earning less than $400,000 and reduce the corporate-tax rate from 35% to 21% in the 2017, the Tax Foundation found.
There is also the problem of optics for Harris. Most of the tax relief from expanding the SALT cap would go to households earning between $200,000 and $500,000, the Tax Foundation said.
Numerous attempts to erase the SALT cap have failed to get through Congress because a number of Republicans and even some Democrats and independents, such as progressive Sen. Bernie Sanders, don’t favor the tax break.
Trump has said he will renew the 2017 tax cuts, including the lower corporate rate and the 15% income tax relief on taxpayers earning less than $100,000. He has also promised to end taxation on Social Security benefits.
Both Trump and Harris have said they want to end taxes on wages in the form of tips. Harris is also saying on her website that she’ll let the 2017 tax credits expire.
Harris said she wants to give “100 million working and middle-class Americans a tax cut” by restoring the Child Tax Credit and the Earned Income Tax Credit, providing a $6,000 tax cut to families with a newborn and giving $25,000 down payment support to first-time homebuyers.
To pay for the subsidies, Harris says she wants to “roll back Trump’s tax cuts for the wealthiest Americans, enacting a billionaire minimum tax, quadrupling the tax on stock buybacks, and other reforms to ensure the very wealthy are playing by the same rules as the middle class.” She also advocates for a long-term capital gains rate of 28% on those earning a million dollars or more annually.
In contrast, Trump said he will raise revenues using new tariffs on imports and government spending cuts from a new commission for government accountability.
Quinn said Trump may also look for additional revenues from wealthy taxpayers. “It would not shock me to see a Trump administration say, ‘Hey you guys are rich people anyway. You're probably not voting for us, so if we have to make a choice about raising tax revenue somewhere in order to preserve our cuts, we might be willing to consider raising taxes on private equity people or 1031 real estate exchanges,’” Quinn said.