The Republican party is heralding its new tax legislation as a win for middle income Americans. But the most substantial tax savings in the bill is reserved for wealthy individuals across the country—and particularly in high-tax states like California and New York.
That’s because the legislation increases the deduction level for state and local taxes, also known as SALT. This allows federal taxpayers who itemize their deductions to fully deduct state and local income taxes as well as property taxes, and is most beneficial to wealthy taxpayers in states with a high cost of living and high tax rates—the ones who are in position to elect for itemizing over the standard deduction. To wit: while only 7% of taxpayers earning under $200,000 itemized deductions in 2022, 38% of taxpayers earning over $200,000 did, according to the Bipartisan Policy Center (BPC).
