Displaying items by tag: salt cap
Ask any high earning northerner about the worst element of Trump’s tax cuts, and you will invariably here the same answer: the introduction of the SALT cap (state and local taxes). The puny cap sent effective tax rates spiking in higher tax states and helped propel a migration southward. Well, that mostly hated legislation might be headed for extinction as calls from lawmakers are growing louder to get rid of it. Interestingly, the push to get rid of it is not coming from Republicans, but Biden’s own party, since it disproportionately affects blue states with high taxes. According to CNBC, “More than 20 Democrats and nine Republicans have joined a bipartisan caucus that has pledged not to vote for any legislation that doesn’t include a repeal of the SALT cap”.
FINSUM: This has always been a pretty rough piece of legislation (logical as it may be), and it is easy to see that Biden may have to compromise on this.
It has largely faded from the news, but Americans in high tax states are feeling the pinch from the SALT cap limits. States are currently mounting a last ditch attempt to stop the new limit through a highly creative legal argument that relies on court precedent from as far back as the Civil War. However, early indications are that the push will fail, finally sounding a death knell for any hopes the cap would be overturned.
FINSUM: As one of our esteemed readers pointed out to us, this SALT cap has much more significant implications than real estate prices or asset allocations. The bigger worry is that the tax-home migration of the wealthy could hollow out the public finances of already precarious state and local governments.