The proposed SALT cap increase to $40,000 is fundamentally a massive gift to wealthy Americans living in high-tax states like California and New York. The $320 billion tax break would primarily benefit households in the top 5% income bracket, boosting their after-tax income by 0.6%. Meanwhile, middle-class taxpayers get crumbs. Critics slam it as a bipartisan love letter to rich coastal elites. The deeper you dig into this proposal, the more it reeks of privilege.
While lawmakers continue their tug-of-war over state and local tax deductions, a new House bill aims to quadruple the controversial SALT cap from $10,000 to $40,000. The proposal, part of a broader tax package approved in May 2025, would primarily benefit those who need it least – wealthy taxpayers in high-tax states like California, New York, and New Jersey.
House proposal to raise SALT cap to $40,000 delivers another tax break to wealthy residents in high-tax coastal states.
Let’s be real: This isn’t exactly a win for the average Joe. The numbers tell a pretty clear story. Households in the 95th to 99th income percentiles would see their after-tax income bump up by 0.6%. Not exactly chump change when you’re talking about high-six-figure incomes. The top 5% of earners are poised to claim the lion’s share of these deduction dollars, while middle-class taxpayers watch from the sidelines. The increased SALT cap would cost approximately $320 billion over time.
The geographic distribution of benefits reads like a who’s who of wealthy zip codes. Connecticut joins California, New York, and New Jersey in the winner’s circle. Meanwhile, residents of low-tax states are left wondering what all the fuss is about. The deduction phases out for single filers earning over $250,000 and joint filers above $500,000 – though that’s hardly reassuring to middle-income families who won’t see much benefit. Without Congressional action, the SALT cap expires in 2025. Some wealthy individuals are establishing irrevocable trusts to optimize their tax benefits and protect assets from creditors.
Critics aren’t mincing words about this one. They say it’s a massive giveaway to the wealthy that will blow up the federal deficit. Sure, the proposal includes a gradual 1% annual increase through 2033, but that’s small comfort given the overall price tag. Proponents argue it addresses unfairness to taxpayers in high-tax states. But when the majority of benefits flow to those who already have the most, that argument starts to look a bit thin.
The Senate’s reception remains uncertain, with some Republicans balking at the prospect of padding wealthy constituents’ wallets. Yet lawmakers from high-tax states continue pushing hard for relief. It’s amazing how bipartisan cooperation suddenly materializes when there’s a tax break for the rich on the table.
