President Trump supports the repeal of the SALT cap. President Trump has reaffirmed his support for repealing the cap on state and local tax (SALT) deductions enacted under the 2017 Tax Cuts and Jobs Act. Eliminating the cap would benefit wealthier taxpayers in high-tax states such as New York, New Jersey, and California. Repealing the cap could cost an estimated $1.2 trillion in lost revenue over ten years.
Trump plans tariffs on Canada, Mexico, and China. President Trump has announced plans to impose tariffs on imports from the three trading partners starting Feb. 1. The New York Times reports that the administration is considering a 25 percent tariff on Canadian and Mexican goods and a 10 percent tariff on Chinese imports, citing concerns over border security and fentanyl trafficking. Business leaders fear that such tariffs could drive up costs for American consumers and manufacturers, given the deep integration of cross-border supply chains. The plans have prompted responses from officials in Canada, Mexico, and China, who are exploring countermeasures.
An easy target for DOGE? Tax expenditures. TPC’s Bill Gale argues that the Department of Government Efficiency (DOGE), headed by tech billionaire Elon Musk, ought to apply the same scrutiny to tax expenditures that it plans for federal regulations and spending. If it does, Bill suggests, DOGE could find efficient ways to reduce the deficit.
Missouri lawmakers advance proposal for capital gains tax exemption. Missouri state Sen. Curtis Trent (R) wants the state to consider exempting capital gains from state taxes as part of their broader tax reform efforts, according to the Missouri Independent. The exemption would cost an estimated $330 million in revenue in the first year and $230 million in the following two years. This proposal is part of a larger push to reduce or eliminate Missouri's individual and corporate income taxes. Even with Missouri's current budget surplus, lawmakers remain cautious about the long-term sustainability of the cuts.
Indiana lawmakers plan future tax cuts tied to revenue growth. Indiana is pursuing a gradual reduction in its individual income tax rate, contingent on state revenue growth. A recently approved bill would further lower the tax rate by 0.05 percent every two years starting in 2030, provided revenue grows by at least three percent.
Other states face budget gaps as revenue growth slows. Many states are facing budget shortfalls and weighing difficult decisions on tax increases and spending cuts, reports Stateline. For example, Washington, Nebraska, and Maine are dealing with declining revenues after years of economic growth, with the phaseout of federal pandemic aid and the rising cost of government services.
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