Former GOP Tax Architect Warns Lifting SALT Cap Could Trigger Higher Taxes in Blue States

Kevin Brady, the former chair of the House Ways and Means Committee and a key architect of Donald Trump’s 2017 tax overhaul, cautioned against repealing the cap on state and local tax (SALT) deductions. Speaking at a press conference organized by the Alliance for Competitive Taxation, Brady argued that lifting the SALT cap would pave the way for blue-state governments to increase taxes, undermining the benefits of the lower federal tax regime established under Trump’s reforms.

The SALT Cap and Its Economic Impact
The 2017 tax reform imposed a $10,000 cap on the SALT deduction, significantly limiting how much taxpayers could write off for state income and property taxes. The measure aimed to fund corporate and individual tax cuts while increasing federal revenues by an estimated $1.2 trillion over 10 years, according to the Committee for a Responsible Federal Budget.

Critics, including Brady, argue that removing the cap could disproportionately benefit high-tax states like New York, California, and New Jersey, allowing them to raise local taxes without federal offsets. He noted that the cap’s revenue contributions were vital to delivering substantial middle-class and small-business tax cuts.

Blue-State Tax Policies
Since the SALT cap was introduced, some states have raised taxes on high earners. For instance:
- New York: Increased taxes on wealthy residents in 2021.
- Minnesota: Raised income taxes for high earners and corporations in 2023 while cutting taxes for middle-income households.
However, most states used federal pandemic relief funds to enact tax cuts in recent years, demonstrating mixed responses to the SALT cap’s economic implications.

The Political Landscape
The 2024 election and Donald Trump’s re-election have reignited debates over the SALT cap. Trump has promised to eliminate it but has yet to provide specifics on how to offset the revenue loss. Meanwhile, with Republicans holding a slim majority in the House, some lawmakers from high-tax states are pushing for a deal that includes SALT cap adjustments in exchange for supporting broader tax legislation.

Brady expressed optimism about reaching a consensus, stating, “They’re going to reach consensus on how to move forward...but increasing [the cap] will have a big impact on revenue.”

What’s Next?
As Congress debates the future of Trump-era tax cuts, the SALT deduction cap remains a contentious issue. While lifting it could alleviate tax burdens for residents of high-tax states, opponents argue that it risks enabling higher state taxes, undermining broader federal tax relief.