A Trillion-Dollar Deduction Could Get Axed to Fund Trump Tax Plan

By Michael KellerMichael Keller, John Voskuhl and John McMcormickJohn McMcormick

If you live in New York, New Jersey or California, President Donald Trump and Congress may not deliver quite as much of a tax cut for you.

That's because Trump's economic advisers have targeted the federal tax deduction individuals can claim for their state and local taxes. Abolishing that break would generate an estimated $1.3 trillion in revenue that Republican tax writers could use to help offset the steep corporate and individual rate cuts Trump has proposed.

Average state and local tax deduction by congressional district
IRS data from 2015 show the average household deduction in Democratic districts was $4,443, versus $2,896 in Republican districts.

Much of that money will come from high earners who live in high-tax states—like those on either coast—who pay much higher state and local tax bills, and therefore claim much higher deductions.

In 2015, Internal Revenue Service data show, an average U.S. taxpayer claimed about $3,598 for the so-called SALT deduction.

In New York's 12th congressional district on Manhattan's east side, the average was $31,078—the highest of the nation's 435 districts. In California's 18th district on the San Francisco Bay, it was $26,668.

Both districts—and in fact, eight of the top 10 districts for use of the SALT deduction—are represented by Democratic lawmakers.

Conservatives favor abolishing the deduction, saying it would rein in tax-and-spend behavior by state and local governments. Mayors' and governors' groups want to preserve it—and they've joined a coalition with public-employees' unions to lobby for the SALT deduction.

In political terms, Democratic districts have a lot more to lose; nationwide, 136 districts registered above-average use of the deduction. Almost 62 percent of them were held by Democrats.

And of the top 25 districts—which accounted for $120.8 billion in SALT deductions—only six were held by Republicans. But dozens of Republican members of Congress may still have a political problem: 52 of them represent districts where the average size of the SALT deduction exceeded the national average.