Will Harris or Trump End the Tax Deduction Cap? Experts Analyze Effects on Arizona Taxpayers

Arizona’s upper-income residents have experienced increasing challenges due to the $10,000 cap on the state and local tax (SALT) deduction, introduced under the Tax Cuts and Jobs Act (TCJA) during Donald Trump’s presidency. As the expiration date of several provisions from the TCJA approaches next year, the potential for changes in the tax code looms large, particularly in the context of the upcoming presidential election.

Former President Trump himself has suggested letting the SALT cap expire. Marc Goldwein, senior vice president of the nonpartisan Committee for a Responsible Federal Budget, indicated that repealing the cap would primarily benefit the wealthiest Arizonans. He noted that while the average tax cut for those in the top 1% could exceed $20,000, the majority in the bottom 80% would see little to no benefit.

Arizona’s tax structure, including a flat 2.5% state income tax and relatively low property taxes, means that a significant portion of taxpayers might not be directly impacted by the SALT deduction cap. According to data from the Tax Foundation, the average taxpayer in Maricopa County paid roughly $1,433.35 in state and local taxes in 2020. Andrey Yushkov, a senior policy analyst at the Tax Foundation, highlighted that Maricopa County residents could potentially lose more than $3,000 if the TCJA provisions expire, compared to a much smaller gain from the SALT cap repeal.

Bridget Grimes, president of Wealth Choice, a financial planning firm, expressed dissatisfaction with the limitations placed on the SALT deduction, calling it an impediment to lowering taxable income. Indeed, the TCJA enacted significant tax reforms in 2017 by lowering rates and altering deductions. If the TCJA lapses, many taxpayers may find their tax rates reverting to previous levels, likely increasing their overall tax burden.

Additionally, the TCJA increased the Child Tax Credit, which would revert to its former level of $1,000 per qualifying child upon expiration. Trump has proposed extending most of the act’s benefits, yet he has made it clear that the SALT cap is one exception he would support allowing to lapse. “We can do it so easily,” Trump stated at a recent campaign rally, suggesting that ending the SALT cap would carry broad economic benefits.

Critics, including Senate Majority Leader Chuck Schumer, have accused Trump of flip-flopping, emphasizing that his administration was responsible for the initial imposition of the SALT deduction cap. Schumer characterized the tax cuts as primarily advantageous to wealthier states that invest in public services like housing and education, contrasting with the negative impact on more liberal states.

Meanwhile, Vice President Kamala Harris has been vocal about opposing tax any increases on households earning under $400,000, indicating a cautious approach to tax reform discussions, particularly regarding the SALT cap. Despite her background as a former attorney general in California, where state taxes are high, she has yet to address the cap specifically.

Democratic leaders continue to argue that the current tax structure disproportionately favors the wealthy, with projections indicating that the top 1% could see average tax cuts of over $60,000 by 2025, while lower-income groups would gain minimally. The entirety of the TCJA was introduced by Republican lawmakers, including Arizona’s own U.S. Rep. David Schweikert, who advocated for the changes as a means to simplify the tax code.

Despite some benefits, the overall simplification of tax filing procedures is contested. Critics point out that while higher standard deductions meant fewer taxpayers needed to itemize, other changes introduced complexities that may have counteracted this benefit. Studies from the Committee for a Responsible Federal Budget warn that extending all individual tax provisions could significantly increase federal deficits, highlighting concerns over fiscal responsibility amidst debates about tax reform.