IE 11 is not supported. For an optimal experience visit our site on another browser.

Black and Latino families could benefit less from state and local tax cap repeal

“There’s a long history in tax policy analysis of not paying enough attention to disparate impacts across race and ethnicity,” said the co-author of the study.
Image: Latino family
A father walks hand-in-hand with his daughter as they enjoy a Fourth of July holiday event in Santa Fe, New Mexico, on July 4, 2018.Robert Alexander / Getty Images file

This article was originally published by CNBC.

Repealing the $10,000 state and local tax deduction cap is likely to have uneven results for Americans.

In fact, Black families are 42 percent less likely and Latino families are 33 percent less likely than white ones to see a tax break from a SALT cap repeal, according to a recent analysis from the left-leaning Institute on Taxation and Economic Policy.

Lawmakers in several high-tax, high cost-of-living states are pushing to do away with the cap, which was enacted by former President Trump’s 2017 tax plan, saying that it raised taxes for some middle-class families.

However, repealing the SALT cap would exacerbate existing racial inequities, according to the institute’s analysis, a gap that President Joe Biden has pledged to narrow.

“There’s a long history in tax policy analysis of not paying enough attention to disparate impacts across race and ethnicity,” said Carl Davis, research director of ITEP who co-authored the study.

Disparity more pronounced in some states

What’s more, a SALT cap repeal would negatively impact minorities in the very states that would benefit most from doing away with the limit, the study found.

Put another way, Black, Latino and some Asian families in New Jersey, California, Illinois and New York would see an even smaller share of benefits from the SALT cap repeal than the national numbers.

Across all four states, Black families are between 44 percent and 54 percent less likely than white ones to see a tax break, and Hispanic families are 49 percent to 60 percent less likely than whites to reap benefits from a SALT cap repeal.

More from Invest in You:These are the money moves to make during an economic recoveryTo combat financial illiteracy, education needs to start early in schoolBernie Sanders introduces bill to make college free, have Wall Street pay for it

In New Jersey, for example, 57 percent of families in the state are white, but 73 percent of benefits from a SALT cap repeal would flow to white families, the study found.

Latino families in New Jersey, who make up 20 percent of families in the state, would see only 9 percent of benefits, and the 13 percent of Black families in New Jersey would see about 6 percent of the tax cuts. Asian families, 9 percent of the state, would see about 11 percent of the benefits of a SALT cap repeal.

Roadblocks to a SALT cap repeal

To be sure, most American families of all races would see little to no benefit from a repeal of the SALT cap.

More than two-thirds of the tax cuts under a potential SALT cap repeal in 2020 would go to those making more than $200,000 per year, which is less than 7 percent of U.S. families, according to the institute.

Other studies have similar findings.

Only 9 percent of American households could see any benefit from a SALT cap repeal, according to the Tax Policy Center. The same analysis found that 96 percent of the benefits from a SALT repeal would flow to the top 20 percent of earners, with 57 percent of benefits going to those with earnings in the top 1 percent.

Still, the SALT repeal is an issue some states. A bipartisan caucus to repeal the SALT cap has said it will not vote for any legislation that doesn’t include ending the $10,000 limit, adding tension to the potential passage of President Joe Biden’s $2.25 trillion infrastructure plan.

The White House has been hesitant to agree to a repeal of the SALT cap due to the cost, however. In its first year, the measure brought in $77.4 billion, and removing the cap would cost about $88.7 billion in 2021 alone, according to the nonpartisan Joint Committee on Taxation. On Tuesday, Rep. Josh Gottheimer, D-N.J., suggested that cutting the SALT cap could be paid for by increased IRS audits.

SIGN UP: Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox.

CHECK OUT: How to make money with creative side hustles, from people who earn thousands on sites like Etsy and Twitch viaGrow with Acorns+CNBC.

Disclosure: Invest in You: Ready. Set. Grow. is a financial wellness and education initiative from CNBC and Acorns, the micro-investing app. NBCUniversal and Comcast Ventures are investors in Acorns.