[music]

Brian Lehrer: It's the Brian Lehrer Show on WNYC. Good morning, everyone. Here's an always, sometimes, never question for you relevant to national politics right now and very relevant to New York, New Jersey, and Connecticut. It's about the SALT deduction. That is deducting state and local taxes, acronym SALT, from your federal income tax. Before 2017, all state and local taxes were federally tax-deductible. The Trump tax changes that year, 2017, limited the SALT deduction to the first $10,000 of state and local taxes. Now it's up for debate again as part of the big tax cut and spending cut, and borrowing bill being debated in Congress that President Trump wants.

That House voted, as many of you know, to raise the cap to the first $40,000 of state and local taxes. Reportedly, it might be hard to get that increase through the Republican Senate. Listeners, you weigh in. State and local income taxes should be federally tax-deductible. I said income taxes. It's all state and local taxes should be federally tax deductible. Always, sometimes, or never. 212-433-WNYC 212-433-9692. Call or text. To help explain what that is and the arguments, as well as the economics of this, we have Andrew Lautz, associate director for the Economic Policy program at the think tank called the Bipartisan Policy Center, which does aim for bipartisan national policies as much as they can.

The SALT issue crosses party lines in its unique way, as many of you in the New York area know, with many New York area and California Democrats and Republicans working together on this, while others on both the left and the right oppose the deduction. Andrew, thanks for coming on. Welcome to WNYC.

Andrew Lautz: Thanks so much for having me, Brian.

Brian Lehrer: Listeners, depending on how many calls we get on SALT, we may get to some of Andrew's other recent writing about other aspects of the tax bill or the tariffs, and the big court decision yesterday on Trump's tariffs. Again, listeners, your questions about SALT are welcome, but also your opinions. State and local income tax-- I did it again. State and local taxes should be federally tax-deductible. Always, sometimes, or never. You tell us. You tell everyone else. Always, sometimes, or never, or any question. 212-433-WNYC 212-433-9692. Andrew, do you know the origin of the SALT deduction, like when state and local taxes became federally tax deductible, and why?

Andrew Lautz: Yes, Brian. State and local taxes in general became federally deductible when we created the federal income tax in 1913. Congress created the federal income tax in part to fund spending in World War I. A lot of the major developments we've had in the federal income tax over the last 100-plus years have been in relation to our war efforts, specifically World War I and World War II. From the time Congress created a federal income tax, they made state and local taxes deductible. Now, there's been a long history of this SALT deduction for a couple of decades. From 1986 to 2004, sales taxes were not deductible.

Congress has been tinkering with the rules over several decades. You're right to point out that 2017 is the first time we had a direct overall cap on state and local taxes. That was $10,000 in the 2017 tax law.

Brian Lehrer: Let me stay on the deeper pass, though, because if state and local taxes were federally tax deductible right from the start of the federal income tax, they were fully tax deductible. In the always, sometimes, never frame, somebody, or I guess the whole majority of the Congress of the United States, wanted them to always be federally tax-deductible. Was there a particular argument or set of arguments for that at that time?

Andrew Lautz: We only have limited history of congressional procedure and debate way back into the 1910s and 1920s. I think part of the argument was there were constitutional concerns in Congress that not making state and local taxes fully deductible would somehow violate separation of powers and fiscal federalism, the divide between federal government and state and local governments. Decades later, in a 1980s case, the Supreme Court essentially rejected that argument, but large SALT deductions have remained and have remained politically popular.

Brian Lehrer: Why did it get limited to $10,000 in the 2017 Trump tax law? If Trump was generally trying to cut people's taxes, including on the wealthy, with the theory that it would create jobs, why did he want to raise taxes in this particular way?

Andrew Lautz: Republican policymakers, including President Trump, wanted to cut taxes by trillions of dollars in 2017, and they did. In order to pay for some of those tax cuts, and overall, as your listeners probably know, the bill did increase deficits and debt. It cost about $1.5 trillion over 10 years at the time it was passed. To prevent that cost from being even higher, being two trillion or 2.5 trillion, or three trillion instead of 1.5 trillion, lawmakers did include some tax increases to offset part of the tax cuts.

Part of the thinking with the $10,000 cap on SALT deductions is that lawmakers wanted to increase the standard deduction. This is the deduction that now 90% of taxpayers take when they file their federal income taxes every year. It used to be that about 2/3 of taxpayers took that standard deduction. Now, post-2017 tax law, 90% of taxpayers take the standard deduction. The Trump tax cuts, the 2017 tax law, doubled the standard deduction. Part of lawmakers' thinking was, "Okay, if we're going to double the standard deduction and get more people to take the standard deduction, we're going to limit the itemized deductions that taxpayers are able to take to pay for that increase."

Brian Lehrer: This was one of those itemizations that got limited. Many critics say it was just revenge against blue states, where most of the SALT deduction is taken, to punish those states, New York, New Jersey, Connecticut, California, primarily for voting against him in 2016. I don't know if you have a take on that as an economy wonk, if that's outside of your portfolio, but do you?

Andrew Lautz: It is outside my lane, but I think you raised a good point earlier, Brian, that this issue has broken across party lines in interesting ways. You have members of both parties who support raising the SALT cap now, and you have members of both parties who oppose raising the SALT cap.

Brian Lehrer: Did some taxpayers, despite the other tax cuts in the 2017 bill, wind up paying more total tax because their SALT deductions got cut to so little?

Andrew Lautz: Yes, that's the short answer. I'll offer the caveat that it would say a small proportion of overall taxpayers, the vast majority of taxpaying Americans, households, businesses, received a net tax cut from the 2017 tax law. That actually extends to New York City, to New Jersey, Connecticut. If you look at average tax rates in 2022, which is the most recent year we have data available, and compare them to 2017, just before the tax law was signed by President Trump, average tax rates in most income cohorts are actually down not only nationally, but in New York, New Jersey, Connecticut.

For most people, the lowering of tax rates, the increase in the standard deduction, the increase in the child tax credit, all those tax cuts outweighed the tax increase from the $10,000 SALT cap.

Brian Lehrer: Oh, here's a caller in Huntington who does apparently suspect that the limit on the SALT deduction was revenge on Long Island. Ann Marie, you're on WNYC. Hello.

Ann Marie: Good morning. Thank you for taking my call. I do believe that this was revenge, and I have seen a difference, as every year our taxes do go up. I can't always blame it on the school taxes because on Long Island, the majority of our property taxes definitely go to the schools, but they have been capped also. What I found in the last four years is, every year, we're paying higher. That's all. I just see it that way. I think it needs to be looked at again. We're paying more money.

Brian Lehrer: Do you mean in your federal income tax?

Ann Marie: Yes.

Brian Lehrer: Anne Marie, thank you very much. Walter in Manhattan is going to make the always argument. It should always be tax-deductible, I think. Walter, you're on WNYC. Thank you for calling in.

Walter: Thank you. First time caller, longtime listener. I think that the tax should always be deductible. It's a question of federalism. The government should encourage the states and local governments to experiment and to take care of their own problems locally, but not double tax it because the federal government otherwise might have to address those needs. To raise the revenue that is lost, I think that the wealthy people around the country, not just in the blue states, should be taxed more heavily.

Brian Lehrer: Walter, thank you very much. He raised a very prominent argument for always make state and local taxes federally tax deductible, Andrew, and that is that it's double taxation. Can you explain in more detail to the rest of our listeners what that argument entails, and you can tell us how true it actually is. It probably depends how you define double taxation.

Andrew Lautz: There's a lot of nuance here, Brian. For proponents of raising the SALT cap, the double taxation argument has been a prominent one to proponents of raising the SALT cap. Having to pay state and local taxes and federal taxes on the same income amounts to being taxed twice on the same income. I actually do see it a different way. Federal taxes, in my view, pay for federal government spending. State taxes pay for state government spending. Your caller raised a good point in that there is this notion of fiscal federalism. The federal government does send a lot of funding to the states, and the states share in providing some services with the federal government.

Generally speaking, those taxes are funding different things. State taxes are funding roads and police departments. Federal taxes are funding the military and Medicare. Fundamentally, these taxes are delivering different services, and that's why I see limits to the double taxation argument.

Brian Lehrer: Maybe we should go over who actually benefits because you wrote an explainer last week called, Which States Benefit Most From the SALT Deduction. I'm just going to read out the top five from your article. It's actually Washington, DC, which is, of course, not a state, but we say the 50 states in Washington, DC, where 20% of taxpayers benefited from the SALT deduction. Then comes Maryland, then California, Utah, and Virginia. Why aren't New York and New Jersey on that list? They're always mentioned in the media coverage along with California.

Andrew Lautz: New York and New Jersey are absolutely two of the states that see the highest impact from SALT. There's a couple different ways of measuring this. In our piece on bipartisanpolicy.org that we published last week, that first measure, that top five you read out, Brian, is the states in which the highest share of taxpayers claim the SALT deduction. There's a different way of measuring this, which is which states have the largest SALT deductions are actually claiming the most dollars in SALT deductions. That list is Connecticut, New York, New Jersey, California, Massachusetts.

Collectively, these measures give us an idea of which states are most affected by changes to the SALT deduction and changes to the SALT cap. New York, New Jersey, Connecticut, absolutely on that list.

Brian Lehrer: Which taxpayers within the high-benefit states actually benefit? Here, I think there's a weird mix. It's not just people making high incomes. It's also many seniors who are homeowners who may have fixed incomes and very limited incomes, but the value of their homes has increased over the years, so they're paying a lot in property taxes. Can you say anything about the mix of people who used to benefit from the unlimited SALT deduction of the past?

Andrew Lautz: Typically, we'd see pre-2017 tax law-- especially in New York, New Jersey, Connecticut, the folks you'd see itemizing their deductions and claiming the SALT deduction were middle-income to high-income taxpayers. Primarily six figure households. Although yes, there were some households with less income but high property taxes that claimed the SALT deduction. I think an important element that often gets missed in the debate about SALT, though, and one that we talked about a few minutes ago, is that the 2017 tax law did increase the standard deduction.

Before the 2017 tax law, standard deduction was about $8,000 for single taxpayers, $16,000 for married taxpayers. Now it's about Double that in 2025. It's $15,000 for single taxpayers, $30,000 for married taxpayers. What that means is that if you're a married taxpayer, all of your itemized deductions, state and local taxes, mortgage interest, charitable deduction, those are the big three itemized deductions. Those have to be more than $30,000 to entice you as a taxpayer to itemize your deductions, go through that whole process instead of taking the standard deduction.

Yes, some tax, some middle-income taxpayers were impacted by the $10,000 SALT cap, but some of them were made partially or even more than whole by the 2017 tax law's increase to the standard deduction.

Brian Lehrer: Right, because they weren't itemizing deductions at all. We're going to go over some other itemized deductions that still exist that you say might have to be limited in order to restore the SALT tax deduction to the extent that Trump and the House are proposing. Before we leave that question of seniors, do you know if there have been many foreclosures on seniors since the limit was imposed in 2017?

Andrew Lautz: I haven't seen data to back that up, but it's something we should look into. Property taxes have always been an important element of the SALT deduction. It's pretty much property tax deductibility and income tax deductibility. Short answer to your question is no, I haven't seen data there.

Brian Lehrer: On the always, sometimes, never scale, state and local taxes should always, sometimes, or never be federally tax deductible. Really, even the $10,000 limit, as low as it was, was a sometimes response. The new limit passed by the House, if the Senate goes along of $40,000, is a sometimes response. It should sometimes be tax-deductible. There's another part of that sometimes that I think in all fairness we should say, and Josh in Manhattan is calling in about that aspect, I think. Josh, you're on WNYC. Hello.

Josh: Oh, hi. How are you?

Brian Lehrer: Good.

Josh: I know that in this H.R. 1 bill, this Big Beautiful Bill, I think it says that beginning in '25, the cap on the state and local tax deduction will increase from 10,000 to 40,000. However, the 40,000 cap phases out to 10,000 for those individuals making more than 500,000 per year, and thus essentially would be a 10,000 cap. I think it phases out, so I'm not really clear, I don't know if it's stated yet what the percentage of the phase-down is. If you make more than 500,000 per year, which is a lot, your 40 starts to decrease to 10. I don't know at what point it will go to 10.

Brian Lehrer: I'm glad you raised that whole scale, Josh, because that's another important aspect of the reform they're proposing. Maybe you know those particular numbers, Andrew, but I think the theory behind it is important, so that there is some kind of progressiveness to that tax and the restoration of the tax cut. If you are making X hundreds of thousands of dollars a year, you get less of the deduction, right?

Andrew Lautz: That's exactly right. We do have those numbers. The phase-out rate once you hit that $500,000 income threshold is 30%. What that basically means is that you go from $40,000 SALT cap to $10,000 SALT cap as you increase in income from $500,000 to $600,000. By the time you hit $600,000 in income, your SALT cap is down again to $10,000. Then there's an additional element to all of this. It's a smaller haircut on SALT, but it does matter. Once you're in the top federal income tax bracket, the 37% bracket, and that occurs around $750,000 in income for a married couple, you are actually getting an additional haircut to your SALT cap.

It's a very complicated formula, but what it practically means is your SALT cap, once you're in that 37% bracket, is actually about $8,650 instead of $10,000. There are multiple moving pieces in this tax bill, but the $40,000 SALT cap, that full $40,000, is really only going to apply for taxpayers making under $500,000.

Brian Lehrer: Let's go from that to the never argument. We've heard some of the it always should be federally tax deductible argument and the sometimes from the last caller. The never argument comes from both the left and the right, and we'll go over each. An argument from the right is, and this is why they don't know if they're going to get it through the Senate. A lot of red-state senators oppose lifting that cap. If a state like New York imposes high taxes on its residents, other Americans from lower tax states shouldn't subsidize those from higher tax states. That's a fair statement of the argument, right, Andrew?

Andrew Lautz: Yes, that is.

Brian Lehrer: Do they? If I can deduct my high state and local taxes from New York, is someone from West Virginia or South Dakota actually subsidizing my life or my government services in any way?

Andrew Lautz: The short answer is it's complicated. Money is fungible, but what we do know is that as a federal government, we are spending way more than we bring in in tax revenue every year. Our annual deficits are in the $1.5 trillion range, projected to go up to two trillion, three trillion. They will go up further if this tax bill passes into law because this tax bill also increases deficits by hundreds of billions of dollars per year.

One way of looking at it is that if we are not paying for increases in the SALT cap that is being funded with higher borrowing, that is kind of subsidized by everyone in America through paying higher interest rates on our debt, through a higher portion of our federal budget going to paying interest on the debt.

Brian Lehrer: In the aggregate, don't these same high tax states-- and we're getting some texts to this effect, don't these same high tax states with the wealthier taxpayers, New York, New Jersey, Connecticut, California, also pay way more than they get back in federal taxes and actually subsidize the low tax states like the Dakotas, West Virginia, Wyoming, et cetera?

Andrew Lautz: To some extent, yes. There are states that give more in tax revenue than they receive in direct federal spending, direct federal grants, and there are states that receive more in federal grants than they contribute in tax revenue. I will say, an underpinning of our federal tax system is that it's a progressive system. As you know, Brian, I use that term technically, not the political use of the term progressive. We have a progressive income tax system that says that if you earn more income, you have a disproportionately higher ability to pay taxes. Which is why our lowest tax rate for individual income starts at 10% and our highest rate goes up to 37%.

It's not a flat tax rate that everyone pays, although some people do support moving to that kind of system. We have that progressive income tax system. I think having a SALT cap of some sort contributes to the progressivity of that tax system by saying that taxpayers who earn more income have a disproportionately higher ability to pay taxes and contribute to the general good.

Brian Lehrer: Right, it might be fair or progressive in that respect, but it demolishes the argument of the low tax states that get subsidized by these wealthier taxpayers in New York, New Jersey, Connecticut, California. It demolishes their argument that they're subsidizing the high tax states through the SALT deduction, you know what I mean? Or that's getting lost in the weeds.

Andrew Lautz: I just go back to money is fungible, right?

Brian Lehrer: You don't want to take a political position, but that's the argument. Further to that argument, here are some texts. One listener writes, and I don't know if this is the actual number, but listener writes, "New York, New Jersey, and Connecticut get about 75 cents back for every dollar they sent to DC. Kentucky gets $2.37. Why don't blue state polls address this?" The listener adds a quote from New Jersey Congressman Josh Gottheimer, who's also one of the candidates in the Democratic primary for governor. Gottheimer quoted here saying, "It's time we fought back against the moocher states. I'm sick and tired of paying their bill." That's how it looks from that standpoint.

That's a little bit on the argument from the right that may stall the restoration of more state and local tax deductibility. When we come back from a break, we're going to talk about the argument against restoring it from the left, including a quote from AOC. Stay with us.

[music]

Brian Lehrer: Brian Lehrer on WNYC. We're having an always, sometimes, never conversation relevant to national politics right now and very relevant to New York, New Jersey, and Connecticut about the SALT deduction, deducting state and local taxes, acronym SALT, from your federal income tax, should be allowed always, sometimes, or never. 212-433-WNYC, 212-433-9692. We're talking this over with Andrew Lautz, associate director for the economic policy program at the think tank called the Bipartisan Policy Center, which does what its name implies. They look for bipartisan solutions to national issues.

We're inviting your calls on the question. State and local taxes should be federally tax-deductible always, sometimes, or never. 212-433-WNYC, 212-433-9692. We're going to get to the never argument from the left now. Let's see if we have one of those on the board. Let me try Anthony in Freehold. I'm not sure if he's going to be from the right or the left, but I think he's against the deduction. Anthony, you're on WNYC. Hello.

Anthony: Hey, Brian. Good to talk to you. Good to be on the show. Thank you so much for taking my call.

Brian Lehrer: Sure. Make your case.

Anthony: I'm on the left side of things. I got no love for Trump, but when he came out with that SALT-- that part of that tax legislation, I thought it was a great idea. I've lived in a few places in New Jersey, one being New Brunswick, which is an urban area in New Jersey. School district isn't great, but the taxes are low. Full paid police department, paid fire department, paid garbage. Then I come down to Freehold, where I live, down here, great school district, no paid fire department, no paid garbage. All my property taxes in Freehold go to the school district, basically.

I understand that that's part of my mortgage payment. I didn't think about my federal taxes when my tax bill went up because I moved to Freehold. I just pay that and I make a decent amount of income. I'm not near the top, but a decent amount of a family income, about 200k a year. I think I should pay my state taxes, and it shouldn't be deductible on my federal tax return. I think it's ridiculous. I think that these Democrats who are arguing for this are showing their true colors a little bit, that they're beholden to the Uber wealthy people that are from this area and from the coastal areas, and that kind of thing. It leaves a bad taste in my mouth.

Brian Lehrer: Anthony, I got you. Thank you very much that you made that case. You made that case well. That is an example, Andrew, right, of the argument from the left, a progressive argument for not having state and local taxes be federally tax deductible because of the income categories that generally benefit. I'll read another one. Back in 2019, during one of the debates on this, Nancy Pelosi was quoted calling the Trump limits on the deduction mean-spirited and politically targeted, but AOC called the deduction a gift to billionaires.

Here's another listener chiming in in a text, raising this limit is a gift to the rich disguised as a benefit for people who live in the lower value towns and cities. Why the difference within the Democratic Party, Andrew? Is it as simple as what I characterize there? The wealthier you are, the more state and local taxes you pay? As Anthony was also making the argument from Freehold, the bigger federal tax deduction you get?

Andrew Lautz: I think a good general rule of thumb is, the higher your SALT cap, the higher income your beneficiaries of that cap that. That generally applies from going from 10,000 to 30,000, from 30,000 to 40,000. The higher up you go on the SALT cap, the wealthier your beneficiaries. I think Anthony and your listeners, Brian, described some of the progressive arguments against raising the SALT cap quite well. If you look at the totality of resources available to the federal government, whether it's coming through in federal tax revenues or paid out in federal spending, if you look at those resources as inherently limited, inherently finite, then you have to engage in a discussion about trade offs.

That is a discussion Republicans are engaging in now with H.R. 1, with their One Big Beautiful Bill Act. They have a cap on how much they can cut taxes in this bill. One way of looking at SALT cap increases is every dollar of a SALT cap increase is a dollar that they can't spend on other tax cuts. The way some Democrats like Representative Ocasio-Cortez see it is that every dollar you spend on the SALT cap is a dollar you can spend on other pressing needs that the government can finance. That's where conservatives and progressives sometimes converge.

Brian Lehrer: Your recent article on SALT is called A Fiscally Responsible Path Forward on the SALT Deduction Cap, which brings up the piece of this topic that I think doesn't get much coverage. How much would it increase the federal deficit or the national debt if the deduction is raised to $40,000 or more? Do you have a number that you can place on that?

Andrew Lautz: Yes, and that number actually comes from our friends at the Tax Foundation. They have a model that projects these revenue effects from tax cuts or tax increases. They've estimated that, totally getting rid of the SALT cap, just extending the rest of the 2017 tax cuts, which Republicans are trying to do right now, but getting rid of that $10,000 SALT cap cost about $1 trillion over 10 years. The changes that--

Brian Lehrer: $1 trillion over 10 years.

Andrew Lautz: $1 trillion. It's a big number. The Republican plan that just passed the House that increases the SALT cap from $10,000 to $40,000, that cost about 330 billion over 10 years. About 1/3 of that cost, but still enormously expensive.

Brian Lehrer: I'm going to go down your list now, and listeners, I think you'll find this interesting. Andrew has a list in his article of eight other tax reform options to make up for lost revenue from restoring more of a SALT deduction. Looking at this list, Andrew, some of these options would be at least as controversial. One of them is, limit the charitable deduction to contributions above 5% of AGI. You'll have to explain what that number actually means. Just the idea of limiting charitable deductions would certainly raise alarm bells in a lot of people.

Another one on the list is repeal the student loan interest deduction. Some of our listeners with student loan debt up to their ears are going, "What?" Another one is, restore what's known as P's, or some other overall limit on itemized deductions. Last one, maybe not as controversial, limit property tax deductibility for second homes. Let's go over some of these. What would it mean to limit the charitable deduction? Right now, that's unlimited. Right? If you're in a high enough tax bracket that you still itemize your deductions, you can donate basically an unlimited amount of your taxable income to charity and get it all deducted from your federal taxes. Right?

Andrew Lautz: The charitable deduction is limited, but it's a very, very high limit. People can take very large charitable deductions if they're very generous in their giving. The current limit is essentially 60% of income. If you bring in $1 million in income and you donate $600,000 of that to charity, you can deduct all $600,000 from your tax bill.

Brian Lehrer: What would the limit be that you reference in that list of options?

Andrew Lautz: The limit that we modeled in partnership with our friends at the Tax Foundation would essentially set a floor on the charitable deduction. It would say you can't claim the itemized deduction for charitable contributions unless those contributions exceed 5% of your income. Take that same taxpayer who makes a million dollars a year, she would have to donate above $50,000 in charitable contributions in order to claim the deduction.

Brian Lehrer: How do you think that would affect the nonprofits of the world?

Andrew Lautz: We actually got into this debate a little bit after the 2017 tax law was signed by President Trump. While the 2017 tax law didn't limit charitable deductions, that trade-off that we talked about of a larger standard deduction and far fewer people taking itemized deductions did concern some in the nonprofit sector that there would be a drop-off in charitable contributions because so many fewer taxpayers were itemizing their deductions. The evidence we saw is that there wasn't really a meaningful drop-off.

There's some good academic research on this that tries to model out, okay, if you were to completely get rid of the charitable deduction, what kind of impact would that have on charitable giving? It would have an impact, but we're talking about a couple percentage points decline in charitable giving if you got rid of the entire deduction. That's not what we're doing here. What we're also trying to do with this option is actually incentivize giving on the margins.

If you're a taxpayer who's given away 4.5% of your income or 4.9% of your income in charitable contributions, you're actually incentivized with that floor to give just a little bit more to charity to get over that 5% limit so that you can claim the itemized deduction. That's some of what we were trying to think about with that option.

Brian Lehrer: I guess the question would be, are you going to incentivize more charitable deductions with that scenario you just laid out? If people are close to the 5% of their taxable income, then maybe they'll exceed it, and that would increase charitable deductions, or would it decrease total charitable deductions because not that many people are close to 5%? Maybe they're more like 2% or 3%, many, many, many, many. Then they wouldn't be able to take that deduction at all, and the total charitable donation amount in the country would go down. That would be a risk. Right?

Andrew Lautz: Yes, and what the modeling tells us is, because this option would save money, it would increase federal revenues, and again, as we laid out in this piece, potentially pay for a larger SALT cap. We do expect charitable deductions to decline. It's a separate question of how much charitable contributions would decline. Again, the evidence that we've read suggests that there would not be this major drop-off in contributions, charitable giving.

Brian Lehrer: Let me take at least one more from your list of ways to pay for the increase in the SALT deduction cap, and that is, repeal the student loan interest deduction. Really? What is that deduction now?

Andrew Lautz: The deduction now allows people who are paying student loan interest-- this is not on the principal, but just on the interest of the loan to deduct a portion of that interest. I don't have the numbers in front of me, but I believe the cap is around $2,000. I can double-check that. It allows them to claim a deduction for part of their student loan interest paid. One justification for this, we understand that especially people paying student loan interest right now, would not like that change.

These are typically, not always, but typically, folks paying student loan interest have earned a degree and have greater earning power than folks further down the income spectrum. We expect it to be a relatively progressive tax change. Again, we're trying to find progressive ways to pay for an increase to the SALT cap. There is also some good research out there on whether the student loan interest deduction actually enables over-borrowing and enables increases in the cost of college, and so certainly would raise some hackles. Not everyone would love the idea, but it's one of the options that's out there.

Brian Lehrer: Just to be clear, and for some of our student loan debt listeners who may be freaking out just hearing this part of the conversation, this is not in the tax bill that's before Congress or the budget bill that's before Congress. This is just a potential proposal from you all at your think tank. Do I have that right?

Andrew Lautz: That's correct. It's not currently in the tax bill. I do want to correct. I had said $2,000. It's actually $2,500, so a little bit different.

Brian Lehrer: We're almost out of time, but before you go, let me take a detour to one other issue very briefly. I noticed as I was looking at your articles and other people's articles on the Bipartisan Policy Committee's webpage, I saw you have one that lists how much revenue the federal government has gotten this year since Trump took office, from tariffs. If I'm reading the chart right, it was a fairly big number, like over $60 billion this year. Though what we usually hear is, the foreign countries don't really pay the tariffs. Consumers pay the tariffs because the prices get passed along in the price of goods from the companies that really need to pay the tariffs.

Can you tell us what number you actually have as to revenue to the federal government, and how you arrived at it?

Andrew Lautz: Yes. In calendar year 2025, since January 1, the United States has brought in $68 billion in gross tariff revenue. That's a large number. It's larger than recent years. For comparison, in both 2024 last year and 2023 two years ago, through the same period in the year, that number was around 38 billion. We're running about $30 billion ahead of where we've run in recent years. What that tells us is that the president's tariff actions in the last several weeks are having an impact relative to previous years.

We don't have a position on tariff and trade policy at Bipartisan Policy Center, but it is an important component to the nuts and bolts of our federal budget, the revenue we're bringing in. To answer your question, Brian, on where we get the data from, we actually get the data from the Treasury Department. They report daily on the revenues coming into the government and the spending going out of the government, and so we track that information daily.

Brian Lehrer: How does it actually work? How does it wind up in the government's coffers? Who's paying what to whom?

Andrew Lautz: These tariffs are collected at the border as imports of goods are coming in, coming across the United States borders. They're collected by the US Customs and Border Protection, or CBP. It's a government agency. Once a month, CBP, Customs and Border Protection, will send a large payment to the Treasury Department. If you go on our website to our tariff tracker, bipartisanpolicy.org, you'll see that even going back prior years, there's a spike once a month, and that's that big payment being made once a month.

Brian Lehrer: Who's making the payment? Is it companies that are importers?

Andrew Lautz: Yes, it's the importers. Whether that's an individual importing something that they bought abroad, or whether it's the company. Yes, it's the importer paying.

Brian Lehrer: So it's Americans paying it to the US Federal government. It's not Chinese companies or Indian companies or take your pick.

Andrew Lautz: Yes, what we call the economic incidents who actually bears the the burden of the tariff is the importer. It's the person bringing it in. There's a lot of economic debate and theory over who actually bears the burden of the tariffs, but the statutory incidence, the legal responsibility for the tariff, is on the importer.

Brian Lehrer: Andrew Lautz, associate director for the Economic Policy program at the think tank the Bipartisan Policy Center, thank you so much for all the explanation you were able to do and for riding along as we took calls and we got in each category on should state and local taxes be federally tax deductible? Always, sometimes, or never. Andrew, thanks so much.

Andrew Lautz: Thank you.

 

Copyright © 2025 New York Public Radio. All rights reserved. Visit our website terms of use at www.wnyc.org for further information.

New York Public Radio transcripts are created on a rush deadline, often by contractors. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of New York Public Radio’s programming is the audio record.