White, Asian families have most to gain if Congress restores tax break Trump capped, report says
Black and Hispanic families in California would get far less of a benefit than white and Asian households if Congress repeals the federal income tax deduction limits on state and local taxes, a study of the impact finds.
White taxpayers would save an average of $2,260 next year if the cap is gone. Asian families would get $2,420. Black families would save $1,080 while Latino households would save $1,020.
Whites make up 46.3% of California taxpayers, but would get 58% of the benefit from SALT repeal next year.
“Outright repeal of the SALT cap without an adequate replacement would exacerbate racial inequities in this country,” said a study from the Institute on Taxation and Economic Policy’s Carl Davis and Jessica Schieder.
The report noted that property taxes tend to be a big component of state and local taxes, which could “disproportionately benefit home-owning taxpayers with homes in whiter neighborhoods.
“In this way, SALT cap repeal exacerbates existing racial inequities in income and homeownership,” it said.
Efforts to repeal the $10,000 limit on SALT deductions, enacted as part of a Republican-authored 2017 tax cut law signed by former President Donald Trump, have gained momentum among officials from high-tax states.
In April, Gov. Gavin Newsom and six other governors sent a letter to President Joe Biden saying “on behalf of our residents, we urge your administration and Congress to continue these efforts to relieve this immense financial burden on our residents and eliminate the SALT cap entirely.” Newsom has not received a response.
In Congress, 33 House members formed a “SALT caucus” this spring. Rep. Young Kim, R-Fullerton, is a co-chair.
She did not respond to a request for comment, but said when the caucus was formed, that her constituents “have been burdened enough by high state and local taxes.”
The caucus has enough political strength to make itself heard as Congress considers major economic initiatives.
Does the tax break help the middle class?
But it faces a considerable roadblock in the Senate, which has 50 Republicans.
“We’ve kind of taken a stand that the economy improved so much because of the 2017 tax bill, the best economy in 50 years, that we shouldn’t touch the 2017 tax bill,” Sen. Charles Grassley, R-Iowa, told The Bee. Grassley is a senior member of the tax-writing Senate Finance Committee.
The House members are not giving up.
“For states like the one I help represent, the $10,000 cap on the SALT deduction hit us hard. Northern New Jersey is unfortunately a high-tax, high cost-of-living area, which means the SALT cap increased taxes on scores of middle class families here,” said Rep. Josh Gottheimer, D-New Jersey, a leader of the SALT repeal effort.
Addressing the impact on people of color, he said the cap has caused many middle and higher income earners to leave the state, “draining New Jersey’s tax base and putting in jeopardy the critical social programs, great schools, and government resources our state provides to support lower-income families and communities.”
Davis of the Institute on Taxation and Economic Policy saw repeal somewhat differently. “Repealing the SALT cap is absolutely not a policy geared toward the middle class,” he said.
SALT impact by race
The study looked at four of the nation’s highest-tax states, California, New Jersey, New York and Illinois.
Nationally, SALT repeal would benefit 9.1% of all families. In California, it would benefit 20.4%.
White Californians would save a total of $19.4 billion, or almost 60% of the benefit going to Golden State residents.
Blacks comprise 5.8% of all state taxpayers, and would get 3.5% of the benefits, or a total of $1.16 billion.
Among Latinos, who make up 30.8% of taxpayers, would get 17.4% of the savings, or $5.8 billion.
Asian-Americans, who make up 13.5% of taxpayers, would get 18.1% of the breaks, or $6 billion.
Reasons for the disparities including differences in white residents’ incomes, homeownership rates and “family structures that are influenced by historical and ongoing discrimination in housing and labor markets and throughout society,” the study found.
Other recent studies have found repealing SALT would largely benefit the wealthy. The Urban Institute-Brookings Tax Policy Center reported in April that households with incomes of $1 million or more would get half the benefit of repeal.
It found that 96% of middle-income households, with incomes of $52,000 to $93,000 a year, would get no break.
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