Latest news with #SALTdeduction
Forbes
a day ago
- Business
- Forbes
Return Of Country Club Dues Deduction Is More Defensible Than SALT
Winged Foot Golf Club in Mamaroneck, New York. (Photo by) While the Tax Cuts and Jobs Act (TCJA) permanently cut the corporate tax rate, a move that effectively ended corporate inversions as a going concern, the bill's personal income tax rate cuts are set to expire at the end of 2025. Congress and the White House are now working to sign a bill later this summer that would prevent end-of-year income tax hikes. Following the House of Representatives' passage last week of a tax bill that would prevent a rise in all income tax rates at the end of the year, the action now moves to the Senate. One aspect of the House tax bill that many are calling on the Senate to drop from its version is the increase in the state and local tax (SALT) deduction from $10,000 to $40,000, with a phaseout of that benefit at $500,000. In the lead up to House passage of the tax bill, President Donald Trump warned congressional Republicans that raising the SALT deduction cap would 'benefit Democrat governors' who, Trump added, 'are destroying our country.' But the SALT boost was reportedly a necessity of passage in the House, as there are enough Republican lawmakers from California and New York who were willing to kill the bill unless it included a SALT deduction hike. 'New York has the highest tax burden of any state in the country,' Congressman Mike Lawler (R-N.Y.), one of the leading voices calling for a higher SALT deduction, posted on X. 'We need to raise the cap on SALT to deliver relief for middle-class families across New York.' 'While politicians in states like New York and California point to the SALT deduction as a middle class benefit, the numbers tell a far different story,' contends Jonathan Williams, president and chief economist at the American Legislative Exchange Council. 'The SALT deduction is a mechanism for socializing the costs of big government policies in a few states across the rest of the nation.' In a May 25 post on X, investor and author David Bahnsen explained the challenges House Republicans have created for themselves given the way they increased the SALT deduction cap, which Bahnsen describes as 'the dumbest risk-reward politically imaginable': 'There are practically no tax filers under 150k income who itemize, and even less with a higher, permanent standard deduction coming. And there are some, but very few between 200 and 400k. The VAST majority of people this hit were well over 500k (and with the lower marginal brackets and AMT relief of the 2017 bill it was higher than that before it resulted in a negative impact).' Bahnsen goes on to warn that, due to the way the House tax bill is structured 'they basically are INCREASING taxes for virtually anyone who was begging them to lift the SALT cap, they are infuriating people under 200k income who see them bending over backwards (or pretending to) for higher earners, and the only real benefit will come to a very small piece of W2 employees who earn between 200 and 400 and happen to itemize.' It's well documented how the benefits of a larger SALT deduction go predominantly to the highest income households. Critics of the SALT deduction, however, also note that it subsidizes the most profligate states and cities in the country at the expense of taxpayers who live in more responsibly governed jurisdictions. That's why some conservatives even argue that it would be more defensible for congressional Republicans to reinstate the income tax deduction for country club dues than it would be to increase the SALT deduction. Until 1994, taxpayers could deduct a percentage of country club membership dues payments if the taxpayer's use of the club was mostly for business purposes. The tax bill that President Bill Clinton signed into law on August 10, 1993 repealed that deduction. The 1993 tax bill also ended deductibility of airline club costs. 'Airline clubs at airports, which often contain meeting rooms and other office facilities, have been popular places to conduct business on the road, as have networks of clubs,' Reuters reported in November 1993. 'A spokesman for American Airlines, which charges $150 annually for use of its 41 Admiral's Clubs around the world, said it recently saw a sudden increase in people asking about buying lifetime memberships in the hope of writing off the dues once and for all in the current tax year.' Resurrection of the country club dues deduction would, like the SALT deduction, primarily benefit upper-income filers. Yet reinstatement of the country club dues deduction wouldn't provide an incentive for state and local lawmakers to tax and spend more than they otherwise would like the SALT deduction does. 'A lot of business meetings happen at country clubs and airline private lounges,' says Ryan Ellis, president of the Center for a Free Economy and an IRS-enrolled agent in charge of a tax preparation firm, 'There's a much better argument for the tax deductibility of these dues (especially for business owners) in red states around the country than there is to justify a really high property tax rate on some McMansion in Westchester County, New York.' 'If Congress is going to revisit tax deductions, restoring SALT is the worst option—it props up fiscally reckless states and shifts the burden to responsible taxpayers,' said Vance Ginn, staff economist at Americans for Tax Reform and president of Ginn Economic Consulting. 'At least a deduction for business-related club dues doesn't incentivize bloated government.' 'But the real reform we need is sustainable budgeting that spends less today while limiting growth to what families can afford—population growth plus inflation,' added Ginn, who previously worked at the White House Office of Management and Budget. 'Washington should stop rewarding bad fiscal behavior and start promoting pro-growth rules that let people prosper.' 'The political incentives are clear enough — elected officials from high tax generally, blue states want to shield their constituents from the consequences of their state's policies without doing the hard work of reducing spending or reining in tax burdens at the state level,' Williams added. 'If residents of New York or California want expensive government services, of course, that's their right. But they should pay for it themselves, directly and transparently. They should not expect working families in Texas or Tennessee or Indiana to subsidize their choices through higher SALT in the federal tax code.' There is a vocal contingent on Capitol Hill calling for a larger SALT deduction. No politician or pundit from either party, meanwhile, is advocating for the reinstatement of the country club dues deduction. Yet, if forced to choose between the reinstatement of the country club membership dues deduction or a more generous SALT deduction, many conservatives will concede there is a stronger case to be made for the country club deduction. That says less about the merits of the dues deduction, however, than it does about the adverse effects of the SALT deduction, for which some Republicans on the Hill have gone to the mat.
Wall Street Journal
22-05-2025
- Politics
- Wall Street Journal
New York, SALT and the ‘Donor State' Myth
In his May 17 letter 'Why I Won't Give In on the SALT Deduction,' Rep. Mike Lawler (R., N.Y.) writes that 'New York is a donor state, receiving less money back than it sends to the federal government in tax revenue.' That hasn't been true for the four most recent years for which data are available. Thanks to Covid spending, New York's comptroller has reported receiving more money from Washington than the state's taxpayers have given in fiscal years 2020, 2021, 2022 and 2023. As Matthew Schoenfeld wrote in these pages in 2020, the claim that New York is a donor state is based on including such sums as military pay and Social Security retiree benefits while excluding things like the tax exemption for municipal bonds—all of which make blue states look more like 'donors' than they really are. New York's state government spends twice as much as Florida's does, despite the latter having more residents. No state has abused ObamaCare Medicaid expansion to the extent New York has. The healthcare program that is supposed to be for poor children and the disabled covers 44% of New York residents, about half of whom are able-bodied, working-age adults, and about a third of whom are likely ineligible for the program. If anything, New York should be more of a 'donor' because the federal government should stop giving it billions of dollars in matching funds for enrolling able-bodied, working-age adults in Medicaid.
Reuters
22-05-2025
- Business
- Reuters
What you need to know about the SALT deduction in Trump's tax bill
NEW YORK, May 22 (Reuters) - Affluent earners who live in states with high property and income taxes may see some relief in President Donald Trump's tax plan. The Republican-led U.S. House of Representatives passed a bill on Thursday that would allow a deduction of up to $40,000 on federal returns for state and local taxes, known as SALT. A previous version of the bill had a cap of $30,000. If passed by the Senate, the new expanded SALT cap would benefit millions of big earners in high-tax states, including New York, New Jersey, Pennsylvania, Maryland, Oregon and California. Since new tax laws in 2017, the SALT deduction has been capped at $10,000. Changes could go into effect for the 2025 tax year, so taxpayers who itemize their deductions could reap bigger returns as early as next year. "If you live in a state with high taxes and make between $200,000 to $500,000, we estimate that it will probably increase after-tax income by nearly 1%," said Ernie Tedeschi, director of economics at The Budget Lab at Yale, a nonpartisan think tank. Lisa Lewis, a certified public accountant and tax expert with TurboTax in San Diego, said upper-income earners had been missing the valuable deduction for property and state income. "Will it move the needle financially? It will help," she said. In its current iteration, the SALT cap would increase by 1% per year through 2033, said Mark Baran, a tax attorney and managing director at CBIZ in Washington, DC. Baran said that many of the people with the most to gain from the SALT deduction live in so-called blue, or Democratic-leaning, states. For everyone else, he said "the distributional effect is unclear." For some residents of high-tax coastal states, this could bring some welcome financial relief. "But it doesn't change that fact that truly high earners are making geographic moves due to tax law," said Eric D. Brotman, a certified financial planner and chief executive officer of BFG Financial Advisors. The tax bill is likely to be altered as it moves its way through the legislative process and some tax experts told Reuters they expect the Senate to tweak parts of the proposed SALT deductions to bring down the cost.
CBS News
22-05-2025
- Business
- CBS News
Some homeowners could get a fat deduction under the new GOP tax bill. Here's what to know.
Some U.S. homeowners may soon get a sizable tax break thanks to the massive budget package that was passed by the House early Thursday. The legislation — dubbed the One Big Beautiful Bill Act — includes a provision that would lift the tax deduction cap for state and local taxes, or SALT, to $40,000 from its current $10,000 limit. That could provide tax savings for homeowners with high property taxes or who earn enough to have significant state income tax liabilities. The SALT deduction cap was introduced by Mr. Trump in his 2017 Tax Cuts and Jobs Act as a way to offset that legislation's tax breaks, such as its reduction in individual income tax rates. Prior to that law, there was no limit on how much in state and local taxes taxpayers could deduct from their federal income taxes. The unlimited SALT deduction had been criticized by some policy experts as mainly benefiting upper-income homeowners in states with high taxes, such as New York and California. But with real estate values surging in recent years, more homeowners around the U.S. are now getting socked with higher property taxes and bumping against the SALT deduction limit, prompting some lawmakers to call for changes to the $10,000 cap. The SALT deduction limit "really eliminated a fairly significant deduction for most taxpayers in Massachusetts, especially given how high property taxes can be here," Boston tax attorney Dan Ryan told CBS News Boston. The backers of the new bill "needed to keep Republicans in New York, New Jersey and California happy," which led to the negotiation for a higher SALT limit, he added. To be sure, the tax and spending bill could undergo more changes before it reaches President Trump's desk. The measure must now go to the Senate, where some Republicans have already expressed opposition to certain aspects of the bill, such as Medicaid spending cuts. What is the SALT deduction cap? The SALT deduction cap was introduced in the 2017 Tax Cuts and Jobs Act, or TCJA, and capped the deduction at $10,000 for both single and married couples. The provision covers state income taxes, property taxes and sales taxes. In 2017, the Treasury Department estimated that almost 11 million taxpayers in high-tax states like New York and New Jersey would forfeit $323 billion in deductions because of the new cap. Some lawmakers criticized the deduction limit for its marriage penalty, given that married couples are subject to the same SALT deduction threshold as single filers. Typically, tax provisions are more generous for married couples because they are designed to cover two individuals. For instance, the standard deduction for married couples is $30,000 in 2025, double the $15,000 standard deduction for single filers. What's changing with the SALT deduction cap? The House tax bill lifts the SALT deduction cap to $40,000, with the new threshold scheduled to take effect for the current 2025 tax year. An earlier version of the bill had proposed a $30,000 deduction limit, but some lawmakers pushed for a higher threshold to help more homeowners. The change was hailed by Republicans from high-tax congressional districts. Rep. Mike Lawler of New York said in a social media post that the increased SALT limit would ease "the tax burden for middle-class and working families." "This includes annual increases for inflation and income caps to ensure this is not a handout for the uber wealthy," Lawler added. The full $40,000 deduction would only be available to filers with household incomes below $500,000. Those who earn above that amount would face a phaseout, although the deduction wouldn't go lower than $10,000. Both the cap and the income limit would increase 1% per year over the next decade, according to a May 22 analysis from law firm Kutak Rock. Who could benefit from the higher SALT cap? People whose deductible expenses — including property taxes, state income taxes and mortgage interest — exceed their standard deduction could benefit from the higher SALT cap. For instance, a married couple would need those costs to surpass their 2025 standard deduction of $30,000 to take advantage of the higher SALT cap. That's because taxpayers typically claim whatever is higher — the standard deduction or their total itemized deductions — to maximize the amount they can tap to lower their federal tax liability. "It will benefit homeowners, especially people who live in wealthier towns with higher property taxes, and higher income taxpayers," Ryan, the tax attorney, told CBS News Boston. High-income homeowners would be the most likely to qualify for the new deduction, with more than half of the benefit going to taxpayers making at least $400,000, according to the Tax Policy Center, a nonpartisan think tank. How much would raising the SALT cap cost the U.S.? If adopted, lifting the SALT cap would result in the federal government forgoing more tax revenue, policy experts say. The $40,000 limit would result in a loss of nearly $334 billion in tax revenue over the next decade, when compared with keeping the $10,000 cap in place, according to an analysis from the Penn Wharton Budget Model, a University of Pennsylvania nonpartisan group that analyzes the fiscal impact of policy. That adds to the cost of a bill that has been criticized by some experts and lawmakers as introducing new tax breaks that could outstrip any savings in the legislation and trillions to the U.S. debt. The Penn Wharton Budget Model "has projected that America will face certain risk of a fiscal crisis within the next two decades, eroding household purchasing power, unless action is taken to reduce federal deficits," Kent Smetters, head of the group, said in a email after the House passed the budget package.
Yahoo
22-05-2025
- Business
- Yahoo
GOP sets out more generous SALT break as House heads for vote on Trump's 'big beautiful bill'
House Republicans have released a revised version of President Trump's "big beautiful bill", which could see a vote on passage in the early hours of Thursday as GOP leaders work to unite warring factions. Late on Wednesday evening, House Speaker Mike Johnson unveiled the last-minute changes to the bill, before the House began an all-night session to debate and then vote on the legislation. It now includes a more generous deduction for state and local taxes (SALT) aimed at meeting demands from conservatives, along with other concessions. Johnson confirmed Wednesday that a SALT deal had been struck to provide a higher deduction of $40,000 annually. That's an increase from the current $10,000 cap and from Johnson's initial offer of $30,000. The political pressure for a vote on the overall bill has been rising, with the White House weighing in on multiple fronts. The focus shifted Wednesday afternoon to members of the fiscally conservative House Freedom Caucus, who have argued the bill was "not ready." These lawmakers went to the White House Wednesday afternoon for a two-hour meeting, with the press secretary offering afterwards that "the meeting was productive and moved the ball in the right direction" without offering additional details. In focus were a series of issues, including an effort to reform and limit Medicaid spending — which many project could lead to millions of Americans losing healthcare coverage — and green energy credits that are also dividing Republicans. The revised bill now accelerates the introduction of new work requirements for Medicaid, with implementation moved to December 2026 from the previous January 2029. The concession from Johnson on SALT came after a group of blue-state Republicans — who described themselves as the "SALTY five" — held out for more generous provisions. The group includes Mike Lawler, Nick LaLota, Andrew Garbarino, Elise Stefanik of New York, as well as Tom Kean of New Jersey and Young Kim of California. LaLota touted the deal in a post Wednesday, saying of SALT deductions, "DC is poised to quadruple it." Lawler added in a television appearance that he would support it. The deal is also expected to set a higher $500,000 cap on annual income for eligibility. The current bill begins to phase out the benefits for those with a modified adjusted gross income above $400,000. Yet this deal is unlikely to be the final word on the SALT issue, with many of these Republican fiscal conservatives long opposed to any additional deductions. There is also less GOP support for SALT in the Senate, which has yet to weigh in. And one of the key remaining fiscal hawk holdouts in the House — Rep. Chip Roy of Texas — immediately slammed the deal, suggesting it amounted to "buying a handful of seats ... in parochial tax subsidies in the form of SALT." It was just one in a flurry of moves Wednesday across Washington, including a tense hearing in the House Rules Committee that had stretched for over 15 hours as of Wednesday afternoon, as Republicans race to bridge a series of fissures within the party ahead of the key vote in the House of Representatives. But the apparent SALT deal could be a step toward resolving a key front vexing Republican leaders, even as the change is sure to add further to a multitrillion-dollar price tag for the overall bill. A recent analysis from the Penn Wharton Budget Model, done before the more generous SALT deal was unveiled, estimated a possible increase in primary deficits of almost $3.3 trillion over 10 years. The bill's overall price tag has raised the ire of deficit hawks, spooked bond markets, and was cited by Moody's during a recent downgrade of US creditworthiness but has done little to dissuade Trump, who traveled to Capitol Hill Tuesday to push undecided Republicans to vote yes, followed by another application of political pressure Wednesday afternoon at the White House. This post has been updated with additional developments. Ben Werschkul is a Washington correspondent for Yahoo Finance. Click here for political news related to business and money policies that will shape tomorrow's stock prices
