Photographer: Andrew Harrer/Bloomberg

White House Open to Keeping Part of State Tax Break, Official Says

Updated on

The Trump administration is open to limiting the deduction for state and local taxes instead of ending it altogether, if there’s enough fiscal space in the Republican tax plan, according to a White House official.

The tax framework released by the White House and GOP leaders last month suggested a full repeal of the so-called SALT deduction -- a push that’s been facing headwinds from Republican lawmakers in high-tax states including New York, New Jersey and California, whose constituents make above-average use of the state tax break.

The framework also calls for almost doubling the standard deduction, part of President Donald Trump’s promise to aid the middle class. Officials want to generate enough revenue from new limits on the state and local tax break to offset the cost of doubling the standard deduction, the official said.

House Republicans met last week to discuss possible accommodations for members opposed to eliminating SALT, such as an income cap to determine who can qualify to deduct state and local taxes.

Any room for compromise, including a cap, will depend on whether the congressional tax-writing committees can make the math work so a tax bill wouldn’t add to the deficit over the next decade, said the official who asked not to be identified because the discussions were private. Under budget rules GOP leaders have said they plan on adhering to, if a tax bill adds to the long-term deficit, its changes have to expire.

Doubling the standard deduction would cost more than $1 trillion over a decade, according to estimates by the Tax Foundation. 

The group has estimated that eliminating the state and local tax deduction would generate $1.8 trillion in revenue over a decade. Limiting the use of the deduction to people with adjusted gross incomes below $400,000 -- a cap that has drawn support from Representative Peter King, a New York Republican, and Representative Tom MacArthur, a New Jersey Republican -- would raise just $481 billion over a decade, according to the Tax Foundation.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE