A Wealth Tax Repeal?

 

You know how the 2017 tax act put a cap on how much state tax you could deduct on your federal tax? This is known as SALT deductions. Some Democrats are asking the House of Representatives to get rid of them.

The Trump administration’s tax reform capped state tax deductions at $10,000, meaning anything you paid in state taxes above that amount could not be deducted from federal tax payments. Accountants joke that this is the “penalty-for-not-voting-for-Trump tax” because it hits states the former President lost the hardest.

Indeed, it was a huge blow to wealthy individuals in high-taxed states such as California, New Jersey and New York. Now lawmakers in those states want to raise taxes even higher but want their taxpayers to be able to deduct these amounts from federal taxes. It is a cause célèbres for high-net-worth individuals.

Republicans do not support repealing this cap. They like it because they say it prevents states from raising taxes at the expense of the federal government.

House Speaker Nancy Pelosi is in favor of repealing this cap and the Biden administration says that they are open to discussing it. Critics say repealing this tax would only benefit wealthy homeowners who already use a pile of tax avoidance strategies.

 

 

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