As long as there has been a federal income tax, taxpayers have been able to deduct most of the state and local taxes they pay from earnings subject to Uncle Sam’s grasp. But that deduction — especially popular in states rich in Democratic voters — could disappear as soon as next year if President Trump and congressional Republicans succeed in their promised rewrite of the tax code.
The state and local tax deduction, or SALT, has long been a target for tax-policy wonks who see it as an unwise federal subsidy that is mainly claimed by the wealthy. But politics have always intervened: Thanks to the opposition of lawmakers in high-tax states, the deduction has survived every effort to clear out loopholes, including the last federal tax overhaul of similar ambition in 1986.
Now, Republican leaders have made clear the SALT deduction is on the table, and it has shaken up a number of blue-state GOP legislators who are warning that it could derail the ambitious tax plan Trump is now pushing.
