The Free Press
President Donald Trump has pivoted from helping Israel bomb Iran to the Capitol Hill battle over his signature tax-budget-and-border bill, which he wants wrapped up by July 4.
“Now that we have made PEACE abroad,” he wrote on Truth Social on Tuesday, “we must finish the job here at home by passing ‘THE GREAT, BIG, BEAUTIFUL BILL,’ and getting the Bill to my desk, ASAP.” He wants Republican senators to get a deal if they have to “lock [themselves] in a room” all weekend.
Even as the Senate grapples with the bill’s many provisions, there is one sticky question that could sink the whole thing: How big a tax subsidy will a MAGA-dominated Congress give to high-income residents of mostly Democratic suburbs and big cities in the upper Midwest and coastal states?
I’m talking, of course, about the state and local income tax deduction, a.k.a. the SALT deduction. Without a significant SALT deduction, a handful of suburban Republicans are threatening to vote against the bill and bring it down. To which one has to ask, what would be worse for the country: not passing a bill, which could endanger extension of the 2017 tax cuts and a much-needed increase in the debt ceiling—or passing a bill that includes a SALT deduction, a demonstrably bad policy that would cost hundreds of billions of dollars?
The bottom 80 percent of households in the income scale will see “no benefit” from this provision, according to the Tax Foundation.
The SALT deduction has long been part of the U.S. tax code. It allowed taxpayers to deduct the full amount of state and local income and property taxes on their federal returns. This especially advantaged upper-middle-class residents of blue states such as New York, California, New Jersey, Illinois, and Maryland.
For these relatively high earners, the SALT deduction was valuable because they usually owed a lot in property taxes and state income tax. (A federal alternative minimum tax curbed the benefits somewhat for the super-rich.)
In 2017, the last year of the old SALT deduction, taxpayers earning more than $200,000 per year enjoyed 71 percent of its benefits—$58 billion in all.
Trump’s 2017 tax reform law slashed the deduction to $10,000 per couple. This was done in part to offset the cost of other tax reductions, but it was also good public policy because it was more equitable, and it created some tax efficiency long sought by reformers.
When Trump’s tax law took effect in 2018, its higher standard deduction plus a new cap on the SALT deduction resulted in much smaller deductions claimed by far fewer households. The average SALT deduction per household fell from $16,000 in 2017 to just $8,300. In New York, the per household numbers fell from $28,200 to $9,400—a 67 percent decrease.
SALT deduction advocates say that without the tax break, people are taxed twice for government services. It’s a dubious claim, since there’s not much overlap between the services federal taxes support (the military, for instance) and those state and local taxes support (like garbage collecting).
Besides padding the after-tax income of doctors, lawyers, and college professors, the SALT deduction has another pernicious effect: It enables higher-income states and localities to tax and spend more than they would otherwise, while shifting the costs to other states.
Almost as soon as Democrats retook control of Washington in 2021, lawmakers from New York and other blue states, including some Republicans, tried to reverse Trump’s truncation of the SALT deduction.
These efforts received strenuous backing from the American Federation of State, County, and Municipal Employees and the teachers unions, pro-Democratic government worker organizations whose members live off the higher government spending that a generous SALT deduction enables.
In fact, SALT restoration was the single most expensive item in President Joe Biden’s $1.75 trillion Build Back Better bill— remember that?—when it passed the House in 2021. It would have cost $207 billion over 10 years.
Red-state senators led by Democrat Joe Manchin of West Virginia blocked that bill, so Biden had to settle for the smaller Inflation Reduction Act, with no increase in the SALT deduction.
Now Republicans rule Washington, and the SALT cap is expiring along with the rest of the 2017 bill’s individual tax provisions.
In short, the price of preserving the GOP’s chance to keep its House majority in 2026 could be to shower billions in collateral benefits on upscale San Franciscans and Manhattanites who never voted for Trump and never will.
Enter suburban GOP House members, such as Young Kim of California and Mike Lawler of New York, who won in swing districts. Now they’re the ones pushing to increase the SALT deduction, rather than the suburban Democrats who played that role in 2021. In this ironic respect, Trump’s Big Beautiful Bill is the mirror image of Biden’s Build Back Better.
Without their votes, the Big Beautiful Bill cannot pass in the narrowly divided House. Taking advantage of their leverage, they insisted that the bill increase the SALT cap permanently to $40,000 per couple, indexed to inflation. Total cost: north of $300 billion. (In a minor concession to tax equity, the increase would gradually phase out for those earning more than $500,000.)
In the House, Speaker of the House Mike Johnson can’t afford to lose even one Republican vote if he hopes to get the bill across the finish line. And he also knows that his slim hopes of retaining a House majority in 2026 could hinge on this sop to the blue-state ’burbs. Yet Lawler, whose district was carried by Kamala Harris in 2024, has said that if the Senate version of the bill has “a penny less” than the $40,000 cap in the House bill, he’ll vote against it. Never mind that the bottom 80 percent of households in the income scale will see “no benefit” from this provision, according to the Tax Foundation.
The Senate has penciled in a continuation of the $10,000 cap in its draft bill—though Majority Leader John Thune has signaled a willingness to negotiate with the House and some sort of increase might well be the price of House passage.
In fact, probably the only person who could restore order to SALT policy at this point is Trump. But he doesn’t seem inclined to do so, despite the fact that the SALT cap was one of his first term’s genuine policy accomplishments. The president himself set the retreat in motion during the 2024 campaign, when, seeking suburban votes in swing states, he promised to revisit the SALT cap if elected again.
Perhaps not even Trump understood just how much of a SALT windfall the House Republicans from these districts would demand in return for supporting the Big Beautiful Bill, which passed the House by one vote.
In short, the price of preserving the GOP’s chance to keep its House majority in 2026 could be to shower billions in collateral benefits on upscale San Franciscans and Manhattanites who never voted for Trump and never will, plus public employee unions that undergird the Democratic Party. Another ironic winner could be socialist Zohran Mamdani of New York, who has promised to impose higher taxes if he becomes mayor in the fall. The SALT deduction would blunt the impact on upscale New Yorkers and perhaps keep some of them from abandoning the city.
These liberal politicians, individuals, and unions probably won’t even write Trump a thank-you note. They might at least pause to consider how they acquired a self-interest in a certain kind of inequality.
