Analysis: Repealing cap on SALT deductions would increase disparities in New York
The report, released last week by the Institute on Taxation and Economic Policy (ITEP), comes after New York passed a $212 billion budget with substantial tax increases on high-income earners. New York Gov. Andrew Cuomo defended the spending plan by saying the tax hikes would be offset by the SALT cap repeal.
Cuomo has panned the cap since it was included in the 2017 tax law pushed by then-President Donald Trump and Republicans in Congress. The cap, set at $10,000, is set to sunset in 2025.
However, ITEP’s report said that repealing the cap would widen the disparities between white families and Black and Hispanic households in key states, including New York, where legislative support is high.
The institute’s analysis shows that while 21.6 percent of white families would benefit from a repeal of the SALT cap, only 12.1% of Black families would benefit. For Hispanic families, the gap is even wider, as only 8.7% would gain.
“It is often difficult for policymakers and the public to fully understand the impact of tax laws across race and ethnicity in part because tax return data do not include information on taxpayers’ races,” authors Carl Davis and Jessica Schieder stated.
Most families who would benefit are those with incomes exceeding $200,000. They not only benefit from the income tax portion of the deduction, but they are also the families more likely to own their home, and their property taxes would qualify as well.
Nationally, white families making more than $200,000 comprise of about 6.7% of the federal taxpayer population. Black and Hispanic families that earn that much combine to make up less than 1.5% of the population.
Moreover, Davos and Schieder said a repeal would actually undermine a lot of the policies Democratic New York state lawmakers sought to include in the spending plan.
A repeal “would also likely crowd out other, much more progressive policies and programs from the upcoming infrastructure package while doing comparatively little to encourage progressive revenue raising at the state and local levels,” they wrote. “Lawmakers should instead replace the SALT deduction cap with a more expansive limitation on itemized deductions such as a broader cap, a floor, or ITEP’s proposed High-Income Tax (HIT) proposal.”