The Big Story 

Democrats and blue-state Republicans defend the state and local tax (SALT) deduction and advocate for a higher cap because their states often pay more in taxes than they get back in services. 

© The Associated Press

They distinguish between “donor states” and “taker states” and argue that, as donors, they should be able to fully exempt their regional taxes from their federal tax bill.

“Most of these states … are high tax states that give more to the federal government than they get back in federal services. Most of the red states are taker states, states that get more from the federal government than they actually pay in taxes,” Rep. Tom Suozzi (D-N.Y.) said during a markup of the tax portion of the GOP bill earlier this month. 

“It’s really not fair that we are being stuck with this cap on our state and local tax deduction because people are getting taxed on taxes that they’ve already paid,” he said.

Republicans in red states see things dramatically differently.

They argue many residents of blue states are simply living in high-tax areas and shouldn’t get a federal tax reduction for doing so. If they want lower taxes, vote to lower the local taxes or move.

State tax experts say blue states are generally sending in more to the federal government than they are getting out in benefits because they have larger local economies and more higher-income taxpayers.

The Hill’s Tobias Burns has more here.

Welcome to The Hill’s Business & Economy newsletter, I’m Aris Folley — covering the intersection of Wall Street and Pennsylvania Avenue.

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