Rep. Josh Gottheimer, a Democrat from New Jersey, making noise on the new Republican tax bill. This bill capped the State and Local Tax (SALT) deduction at $40,000 and he discussed how that hurts middle class families. The legislation would repeal or modify a number of tax provisions, most significantly impacting high-income earners and taxpayers in states with above-average taxes. This provision is scheduled to be implemented in 2025.
Garrett Watson, the director of policy analysis at the Tax Foundation, said that for 80% of taxpayers, benefits will be modest to negligible. This income phaseout starts at $400,000. He stated, “Any changes to lift the cap would primarily benefit higher earners.” This makes one wonder how equitable the bill’s promised benefits will be, especially for those middle-class families.
The Tax Cuts and Jobs Act, passed in late 2017, doubled the standard deduction. Since then, it has been raised every year to keep pace with inflation. In 2025, the standard deduction will be $15,000 for individuals and $30,000 for married couples filing jointly. After all, about 90% of taxpayers take the standard deduction. That’s a loss of more than 15,000 itemized tax breaks, based on the most recent IRS data.
Rep. Gottheimer challenged the narrative around tax benefits for middle-class families, asserting that the current structure unfairly burdens residents in Northeastern states. He called them all “red moocher states.” This awful term implies that they rely on the generosity of richer taxpayers to pay for their services. He emphasized the need for equitable tax policies that support all families by stating that the bill represents a “huge tax cut and benefit for middle-class families around the country.”
As of 2025, people with more than $626,350 in taxable income will be subject to a maximum income tax rate of 37%. For married couples filing jointly, this rate will kick in when their income goes over $751,600. These thresholds serve to illustrate even more how the proposed changes would disproportionately benefit higher earners to the detriment of middle-income households.
As Republicans look to remove all EV and green Tax Credits with the SALT repeal joyous. That would have a disproportionate impact on some sectors and taxpayers over others. The implications of this bold move will be watched closely as House and Senate tax reform discussions continue to unfold.