Former President Donald Trump recently pledged to restore the State and Local Tax (SALT) deduction that he previously capped during his first term in office, as part of an attempt to appeal to blue New York ahead of his Long Island rally. The SALT deduction allows taxpayers to deduct their state and local taxes from their adjusted gross income on federal income taxes. Trump had signed the Tax Cuts and Jobs Act of 2017, which capped SALT at $10,000, disproportionately affecting states with higher taxes such as New York’s Empire State.
According to Trump’s pledge on Truth Social, he vowed to “turn it around, get SALT back, lower your taxes, and so much more,” adding that he would work with the Democrat Governor and Mayor of New York to ensure that the necessary funding is provided for the revival of New York State. Queens-born Trump has been particularly focused on flipping New York State in this election cycle, declaring that his rally at Nassau Coliseum on Long Island would be a “really big deal” and packed with patriots.
New York and New Jersey politicians have long advocated for removing or dramatically reducing the SALT deduction cap to provide relief to their constituents. For instance, an individual making $100,000 in 2023 who paid $20,500 in state, local, property, and other eligible taxes could save approximately $2,300 on their federal tax bill if the SALT cap were eliminated. This would not account for other potential deductions, as exact tax bills vary based on an individual’s situation.
However, lifting the SALT cap would likely benefit New York’s economy overall. Former New York Governor Andrew Cuomo had called for nixing the SALT cap before leaving office, arguing that it would bolster the Empire State’s economy and provide tax relief, reducing incentives for high-income earners to leave the state.
New York Republicans in Congress and many Democrats from both New York and New Jersey have long pushed for rolling back the SALT cap. In 2021, several Democratic representatives, such as Rep. Josh Gottheimer (D-NJ), pushed for raising the cap as part of the “Build Back Better” plan. Despite the controversy surrounding this proposal within the Democratic party, they ultimately dropped it in favor of the more scaled-back Inflation Reduction Act.
When Republicans controlled both chambers of Congress in 2017, they imposed the $10,000 cap on SALT deductions to reduce the deficit from their corporate tax reform efforts. This was part of a broader push to simplify the tax code. Some provisions of the 2017 tax reform package, such as the SALT cap, are set to expire at the end of 2025, which could result in a reduction of federal revenue by $139 billion, according to the nonpartisan Joint Committee on Taxation.
Throughout his 2024 campaign, Trump has vowed to drastically reduce taxes in various areas, such as eliminating taxes on tips and Social Security. While these policy proposals seem aimed at key voter blocs like workers in Nevada’s service industry and older voters, Trump has been light on details about how some of these specific tax cuts would work and how he would pay for them. The Manhattan Institute’s senior fellow, Brian Riedl, estimated that Trump’s slate of tax reductions could increase the deficit by $11 trillion over a decade.
