Analysis Shows Lifting SALT Cap Would Create Thousands of CA Jobs

A new analysis by the Bay Area Council Economic Institute suggests that restoring the full state and local tax (SALT) deduction would create thousands of new jobs in California as the state works to reopen its economy and build back from a year of COVID shutdowns. As part of President Trump’s 2017 tax cut, the SALT deduction was capped at $10,000. The change resulted in Californians paying an additional $11.2 billion in federal taxes in 2018 and effectively resulted in 55,000 fewer jobs being created, jobs that would have provided the equivalent of $3.4 billion in wages across a range of industries.

The analysis comes as debate grows in D.C. over the question of restoring the full SALT deduction. The issue was a central point of the Council’s advocacy during discussions last week with top Congressional and White House leaders as part of our D.C. Week. And the Council this week joined The Los Angeles Coalition for the Economy and Jobs in sending a letter to California’s Congressional representatives asking them to prioritize restoring the SALT deduction.

What all this means is that California’s workers and residents are now sending more of their income to the federal government, which already disproportionately subsidizes a large block of sparsely populated states with smaller-scale economies and those without a state income tax, like Texas and Florida. California’s residents are essentially subsidizing the federal government and many other states, not the other way around.