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By Rep. Mike Levin
As I travel around South Orange County and the rest of our district, there’s one issue that I hear about consistently from constituents across the ideological spectrum: the State and Local Tax (SALT) deduction.
The SALT deduction has been around since the Revenue Act of 1913, allowing taxpayers to claim deductions for the taxes they pay to state and local governments. However, the 2017 tax bill capped the SALT deduction at $10,000, meaning many families in South Orange County can no longer deduct as much from their federal tax bill as they had previously. They’re now being penalized simply because they live and work in a state that has chosen to make more investments in its communities.
While the SALT deduction is tarred by some as a tax break for the wealthy, a closer look tells a different story. During the last year in which the SALT deduction was uncapped, more than 3 million families in California with an adjusted gross income below $100,000 claimed the deduction. In the same year, there were 58,060 filers in our district making less than $100,000 who took advantage of the SALT deduction. Many were not wealthy by any means. These are nurses, firefighters, teachers and others just trying to make ends meet.
The SALT deduction put thousands of dollars back into the pockets of these lower- and middle-income families. For some, these savings were critical to buying a home or putting their children through college. Many of our neighbors purchased homes with the expectation that they could fully deduct local property taxes from their federal tax bill. In Orange County, the typical home value is now $829,115, meaning many homeowners hit the SALT deduction cap of $10,000 based on their property taxes alone.
The SALT cap also creates a massive marriage penalty. The $10,000 cap applies per tax filer, so if an unmarried couple owned a home together, they would each be eligible to deduct $10,000 in state and local taxes; if they marry, their deduction would be slashed in half.
It’s time to restore some basic fairness to our tax code and repeal the SALT deduction, or at least increase the cap significantly. This is an issue I have been focused on since the cap was imposed in 2017. I’ve cosponsored several bipartisan bills to restore the full deduction, and now there is hope that we can lift the SALT cap as part of economic recovery legislation this year. I recently led a letter with 40 other members of the California Congressional delegation urging President Biden to support elimination of the SALT cap, and my colleagues and I recently formed a bipartisan SALT caucus focused on our shared goal of repealing the cap.
Middle-class families in South Orange County and throughout our district deserve tax fairness. Repealing or substantially increasing the SALT cap would be a strong start.
U.S. Representative Mike Levin represents the 49th Congressional District, which includes the South Orange County cities of Dana Point, San Clemente and San Juan Capistrano. He was reelected for a second term in 2020 and resides in San Juan Capistrano with his wife and two children.