Many in high-tax areas weren't getting SALT deduction before GOP tax law: report

Many taxpayers in blue states were not able to take advantage of the state and local tax (SALT) deduction prior to the enactment of President TrumpDonald John TrumpA better VA, with mental health services, is essential for America's veterans Pelosi, Nadler tangle on impeachment, contempt vote Trump arrives in Japan to kick off 4-day state visit MORE's 2017 tax law, according to an analysis from Bloomberg published Tuesday.

The article comes during the first filing season under Trump's tax law, which capped the SALT deduction at $10,000. A number of politicians in blue states are pushing Congress to restore the full SALT deduction, citing complaints from taxpayers about smaller refunds and tax increases this year.

Bloomberg looked at 2016 IRS data from 10 wealthy counties in New York, New Jersey, Connecticut and California. The news outlet found that about three-quarters of the people in those counties who paid more than $10,000 in state and local taxes in the past also were subject to the alternative minimum tax (AMT). That means they couldn't benefit from the SALT deduction at the time.

The Trump tax law reduces the number of people who are subject to the AMT, so some people who used to have their SALT deductions disallowed because of the AMT will now get to claim $10,000 in SALT deductions, Bloomberg reported.

The news outlet said that its analysis "could deflate some of the heated rhetoric over the 2017 tax overhaul, the Republican Party’s signature legislation of the Trump era." 

Bloomberg's analysis is in line with other analyses finding that most people will get tax cuts initially under Trump's tax law, even in high-tax states. 

The Urban-Brookings Tax Policy Center estimated last year that in every state, at least 60 percent of taxpayers will get a tax cut for 2018 as a result of the major individual income tax provisions in the GOP tax law.

However, the think tank also estimated that high-tax states were among those with the greatest percentage of taxpayers seeing a tax increase.

For example, more than 9 percent of households in New Jersey and Maryland are expected to see a tax increase for 2018, compared to 6.3 percent across the United States. The Tax Policy Center said that the variation across states largely occurs among higher-income taxpayers.