The US election race continues and the candidates continue to present their economic proposals. Republican and former President Donald Trump continues his mantra of lowering taxes. On his social network Truth Social, he assured, before a rally in Long Island, that he wanted to eliminate the $10,000 deductible per person from local and state taxes and bring it back to 100%, a measure that, according to experts, could cost the country up to $1.2 trillion in ten years.
This covered tax bonus was put in place by himself in 2017, when he was president, and is part of the mechanism known as SALT (for the acronym in English for State and Local Tax) and which is part of a tax project with which he intended to raise 3.5 billion dollars for the Treasury.
Before 2018, state and local income and property taxes were generally deductible nationwide. Along with other changes to the tax code, the Tax Cuts and Jobs Act of 2017 (TCJA), pushed by Trump himself, set this limit on the amount of state and local taxes a person could deduct.
Donald Trump’s campaign has not provided further details on the proposal, but the Committee for a Responsible Federal Budget, a nonprofit dedicated to analyzing candidates’ proposals, said in a report that removing the SALT limit “would be a costly mistake,” more precisely 1.2 trillion dollars in a decade. Add to that the $4 trillion to extend the tax cuts that end this year and the more than $2 trillion in other tax cut promises from the Republican candidate.
“In theory, the tax deduction exists to offset some federal taxpayer liability by excluding income already collected in the form of taxes for state and local government services,” they explain from the Tax Foundation.
When Trump established the deduction cap in 2017, he legislated it to be a completely temporary measure. Thus, it is expected that by the end of 2025, the 100% tax creditsBut American finances cannot afford such a disaster in the coming years, experts say.
Garett Watson, senior policy analyst and model manager at the Tax Foundation, explained to elEconomista.es that keeping the SALT deduction unlimited “would also increase the regressivity of the tax code, since those who earn the most are, by far, the greatest beneficiaries of these deductions,” since the individual must declare more than $10,000 in state and local taxes and itemize their federal taxes, “which are more common among those who earn the most,” he explained.
The Budget Committee also explained that repealing the SALT cap “would not simply mean that taxpayers would roll back to 2017.” They noted that “many taxpayers who took the deduction that year ‘would not get any benefit from the repeal’ since the standard deduction is ‘much larger than the current one,’ meaning that as of today ‘they would not be eligible for the 2017 SALT deduction because they paid the (now significantly reduced) alternative minimum tax,” they said in a report.
The recovery calculations that were made at the Fiscal Foundation in the event that this limit of $10,000 is maintained amount to $93.4 billion this year and 979.4 billion in a decade, or nearly a trillion dollars.
Regarding those who benefit from the 100% SALT bonus, Garett Watson points out that it would only increase income by 2.7% for a large minority of taxpayers (1%), “while it would bring no benefit to 40% of people who itemize their income.” tax deductions.
At the Tax Foundation, they did a survey and the counties where SALT deductions are most concentrated are California and New York, two of the states withwith the highest incomes in the country but traditionally Democrats, so it is not insignificant that Trump announced it before giving his rally on Long Island, New York.
It is possible to reduce taxes
Garett Watson assured elEconomista.es that there is a possibility of reducing taxes and simplifying the country’s tax system, but this “would require broadening the tax base by eliminating individual and business tax deductions, credits and other tax expenditures that deviate from a model of efficiency and growth” -a friendly tax base.
This measure, he assures, “would make it possible to compensate for the loss of income.” However, the expert is clear: “there is a great political challenge” in fiscal matters in the United States.
