Californians could get bigger state, local tax deductions. Why that matters
The way it was: about one-third of Sacramento County taxpayers deducted an average of $12,000 from their federal income tax for the state and local taxes they had paid in 2017.
Thanks to the Trump administration’s 2017 tax overhaul, that deduction was capped at $10,000 annually. As a result of that law, and other changes, about 13% of county filers deducted what they could in 2022 in state and local taxes, or SALT.
The $10,000 limit has affected California taxpayers more than almost any other state, and a small group of congressional lawmakers are now trying frantically to get it lifted as part of the new Republican tax bill.
The impact on the Sacramento area and much of California would be substantial, according to a new study by Nikhita Airi, research associate at the nonpartisan Tax Policy Center.
In 2017, eight counties in the nation had filers with average SALT deductions of more than $30,000. Four were in California: Marin, San Mateo, Santa Clara and San Francisco, Airi found.
Lawmakers are considering new caps of $30,000, $40,000 and other amounts for lower and moderate income taxpayers.
Almost any of those limits would be a big benefit to local taxpayers.
The Tax Policy Center found that in El Dorado and Placer counties, 45% of taxpayers claimed an average of roughly $16,500 in SALT deductions before 2017. That figure dropped to 19% to 20% in 2022 and the average was $8,900 to $9,100, per the latest data available.
In Yolo County, 35% had claimed SALT breaks averaging $15,300 before the change; in 2022 the percentage using the deduction was 13% and the average was $9,000.
Thirty-nine percent of San Luis Obispo County taxpayers claimed the deduction in 2017 averaging $14,600. The percentage in 2022 was 17% and the average deduction was $8,700.
Trouble ahead?
The effort to raise the cap faces some huge hurdles, notably its limited appeal.
.A small group of Republican center-right lawmakers from California, New York and New Jersey say raising the limit is crucial, and their support is essential if the closely-divided House is to pass the tax bill next week.
“My fellow SALTy Republicans and I want to support the One Big Beautiful Bill. But without a meaningful fix to the unfair SALT cap — a cap that didn’t exist for over a century until 2017 — it won’t be beautiful, and it won’t earn our votes,” Rep. Nick LaLota, R-New York, said on X.
Rep. Kevin Kiley, R-Roseville, did not draw such a red line. “$30,000 is better than $10,000. That’s an improvement. I’d like to see it go higher,” he said, adding, “we’re simply looking to restore some measure of relief to folks in California.”
One of the arguments against raising the cap is that it primarily benefits the wealthy.
“I wouldn’t expect it to pass because the Democrats always complain we’re helping rich people. That’s helping the top 10% with a massive windfall of billions and billions of dollars,” Sen. Charles Grassley, R-Iowa, a key author of the 2017 tax bill, told The Bee earlier this year.
Most of the proposals in the House would limit the deduction to lower and middle income taxpayers.
Democratic concerns
Rep. Mike Thompson, D-St. Helena, is the senior Democratic Californian on the Ways and Means Committee and has fought for years for a bigger SALT deduction.
The best way now to help Californians get a larger deduction, he said, “is for the Republicans to let the tax bill expire.” If that happened, the SALT deduction would revert to being unlimited.
There’s a bigger problem in all this: how to pay for it.
The massive tax and budget bill the House is considering already would cost an estimated $3.8 trillion over 10 years. Capping the SALT deduction at $30,000 and phasing it out for higher incomes would cost $916 billion.
Lawmakers in the ultra-conservative House Freedom Caucus are already alarmed at the impact of the entire bill, which also includes spending cuts, on the national debt. They’re particularly incensed that the bill does not reform and cut spending on Medicaid, or Medi-Cal as it’s called in California.
“I’ve got to go fight to reform Medicaid so we can stop funding the able-bodied, stop the blue state money laundering and restore fiscal sanity for the American people,” said Rep. Chip Roy, R-Texas.
There is a big group of taxpayers who won’t be affected dramatically by big changes in the SALT cap.
They tend to live in the Central Valley and other largely rural areas, where roughly one-fourth of taxpayers in Yuba, Stanislaus, Merced, Madera, Fresno and Tulare counties used the deduction before the change. But in most of those counties, the average deduction was at or near $10,000.
This story was originally published May 16, 2025 at 5:00 AM with the headline "Californians could get bigger state, local tax deductions. Why that matters."
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