Heritage Foundation’s chief economist, Ej Antoni, places emphasis on the surge in the Treasury Department and discusses what lawmakers should prioritize in the “big, beautiful bill” on President Donald Trump’s “bottom line.”
A new analysis by Goldman Sachs shows that while legislators have a high limit on state and local tax (salt) deductions, it is unlikely that potential tax savings will stop moving to states like Florida and Texas.
A report written by Goldman Economists, led by Jan Hatzius, said that interstate migration over the past 20 years has caused the US population to migrate from the northeast and west coast to the south and southwest. The migration has accelerated in recent years as a result of a pandemic-induced change in work contracts and the $10,000 limit on salt deductions enacted through the 2017 Tax Cuts and Employment Act.
The $10,000 cap is expected to expire at the end of 2025, and Republicans in Congress are considering including a high cap in one big beautiful bill law that narrowed the $40,000 cap last month to secure support for Republican lawmakers from high-value states such as New York.
As Congress is considering changing the salt cap, Goldman Sachs analysis found that high-income earners continue to leave their high-tax status to low-tax status, and that trends are expected to continue even at higher salt deduction limits.
Here are the changes to the salt tax credit for “big, beautiful bills”:
Goldman Sachs found that higher salt deductions are unlikely to change the incentives for high-income earners to transition from high-tax to low-tax states. (J. David Ake/Getty Images)
“Immigration from high-tax states from low-tax states (and related impacts) could continue. The House Republican settlement proposal will increase the salt deduction cap to $40,000 for households under $500,000 a year, but will not change the incentives for top-wheiners, who are most likely to have the biggest impact on state budgets,” wrote Goldman Economist.
They found that tax returns by New York residents with adjusted gross income (AGI) of over $1 million have increased by 40% since 2016. Such submissions have risen dramatically at a dramatically faster tax rate elsewhere, including 150% in Florida and 90% nationwide.
Apart from Empire, California and Massachusetts saw the sharpest decline in filers above its $1 million AGI threshold, while Texas and Arizona experienced the second and third largest increases in Florida.
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Florida is influx of high-income taxpayers and businesses, partly due to a low-tax economic environment. (via Getty Images via Jeffrey Greenberg/UCG/Universal Image Group)
The analysis noted that high-income earners are more likely to take businesses to move to a low-tax state that exacerbates their previous state tax base. Goldman Sachs economists estimated that tax revenues in relatively high-tax states such as New York and California fell by around 3%, a slight decline of 1%-2% in other high-tax states such as Oregon, Minnesota and Illinois.
Critics of the salt deduction argue that if high-tax states are worried about losing high-income residents and businesses to low-tax regions, they should move to lower competitive taxes in higher-tax regions.
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New York has seen the leaks of high-income spills to states with low taxes. (Angelawice/AFP via Getty Images)
Advocates for the higher salt cap left a heavy burden on residents, pointing to an increase in the outflow of residents and businesses from high taxes under the 2017 tax law to low tax states.
“Salt caps are not only collected unfairly and collect state and local taxes people are already paying, but they are also a major factor in pushing taxpayers out of high-tax states like New York to low-tax states like Florida and Texas.” “Salt movement encourages people to leave their homes, thereby increasing the burden on those who choose to stay.”
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Suozzi added that due to the low population during the reclosure of one house seat in interstate house seating, the issue of foreign immigration is “a major source of concern when the 2030 census unfolds and our representation in Congress again shrinks.”
