5-Year SALT Cap Repeal Would Be Costliest Part of Build Back Better
According to press reports, policymakers are considering adding a five-year repeal of the $10,000 cap on the State and Local Tax (SALT) deduction to their Build Back Better reconciliation package – including one retroactive year. As we’ve shown before, this policy is highly regressive and would turn Build Back Better into a net tax cut for the vast majority of high-income households.
A five-year repeal would cost roughly $475 billion, with $400 billion of the tax cut going to the top 5 percent of households. That is more than any other part of Build Back Better, including the Child Tax Credit, spending on child care and pre-K, climate-related tax credits, or health care funding.
The tax cut would allegedly be offset by reinstating the SALT cap after it is set to expire with the majority of the Tax Cuts and Jobs Act in 2026. This is an obvious shell game; paying for repeal of SALT cap by extending that very SALT cap does not pass the credibility test. In reality, this is setting the stage for over $1 trillion of tax cuts over the decade. Claims that SALT cap repeal would not add to the debt are highly misleading and not grounded in reality.
As we’ve said before, repealing the SALT cap in Build Back Better would be a costly mistake.
Read more options and analyses on our SALT Deduction Resources page.