By: Mark Glennon*
Progressive Chicagoans are mourning last week’s ruling by a Cook County Judge that invalidated a ballot provision for Chicago’s March election to make the city’s real estate transfer tax progressive. Dubbed the “Mansion Tax” by supporters, owners of expensive properties would have paid more and others less.
But remember the biggest mansion tax of all, and who hates it. It’s the $10,000 cap on state on and local tax (SALT) deductions that became law in 2017, and it’s mostly progressive lawmakers who opposed it then, fought to repeal it and are now working to let it expire.
The $10,000 cap was part of the 2017 Tax Cuts and Jobs Act (TCJA). Wealthy homeowners typically pay multiples of that in property taxes, which no longer are deductible beyond the cap. Moderate and lower income homeowners were not affected. Instead of itemizing property tax payments, they take a standard deduction that was hiked to $24,000 by TCJA and is $27,700 today.
Wealthy homeowners got slaughtered. Aside from loss of the tax deductions, the rich ended up with homes worth about a trillion dollars less than they would be without the SALT change, according to a Moody’s calculation. The 40 counties hit hardest by the SALT cap are almost entirely wealthy ones in the Northeast and Illinois, Moody’s found. Seven of those 40 counties are in Illinois – Cook and surrounding counties.
The left-leaning Institute on Taxation and Economic Policy, ITEP, wrote this about how the rich would benefit if the SALT cap were eliminated:
ITEP estimated that this would cost more than $90 billion in a single year. We found that 62 percent of the benefits would go to the richest 1 percent and 86 percent would go to the richest 5 percent. There is no state where this is a primarily middle-class issue. In every state and the District of Columbia, more than half of the benefits would go to the richest 5 percent of taxpayers. In all but six states, more than half of the benefits would go to the richest 1 percent.
But it’s progressive lawmakers who most despise the SALT cap. TCJA was perhaps the most vile thing Congress ever produced, as some of them saw it when passed. The “worst bill in the history of the United States Congress,” said House Speaker Nancy Pelosi. “The American plutocracy gets its immoral tax bill,” wrote Jesse Jackson in the Chicago Sun-Times.
Illinois progressives have worked hard to get rid of the SALT cap or at least to loosen it. Illinois Senators Dick Durbin and Tammy Duckworth, as well as Illinois Rep. Brad Schneider, have led the charge. They’ve each sponsored bills to eliminate the SALT cap since if became law. Gov. JB Pritzker and governors from six other high-tax blue states sent a letter in 2021 to President Biden asking for elimination of the cap.
Not all opponents of the SALT cap are progressives. Some vulnerable House Republicans in high property tax New York recently supported a bill to loosen the cap though for just a year, and the proposal is now dead.
Opponents of the SALT cap are up against tax analysts on the left, center and right who agree that eliminating the cap or increasing it would be wrong. The Progressive Policy Institute says elimination would be a “pointless giveaway to the rich.” Brookings says increasing the cap would be a “handout to the rich” and a better idea would be allowing no SALT deduction at all. The Tax Foundation says allowing the SALT deduction “disproportionally benefits high-income taxpayers, violating the principle of tax neutrality.”
Raising or eliminating the cap on SALT deductions would also be costly to the federal government. If the SALT cap were increased to $100,000 for non-married filers regardless of income and to $200,000 for married filers regardless of income, the cost would be $134 billion, according to a recent brief by the Wharton business school. Eliminating the SALT deduction cap entirely beginning in 2024 would cost an additional $1.1 trillion, it says.
None of that will stop SALT cap opponents next year. “Buckle Up. 2025 promises to be an historic year in tax and budget policy,” as the Tax Policy Center put it. That’s because most of TCJA, including the SALT cap, will expire then, setting up a massive battle over extension. You can expect progressives favored by “Mansion Tax” supporters to be fighting to let it expire.
*Mark Glennon is founder of Wirepoints.
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
They are mourning no longer. Appellate court vacates lower court ruling. Let the tears flow from the doom grifters.
Tears from Chicago building owners.
Bill, I would be interested to hear what you think on the merits of the mansion tax. Its $100 million/year in revenue will get only a few hundred new housing units per year. Don’t you think that’s far outweighed by the anger it will cause with developers and investor who will be more inclined to avoid the city?
Homestead exemption fraud is the most abused tax deduction.
Just ask Chicago Teachers Union President Stacey Davis Gates!
Downstate we had a Chairman of the Board of Review claim multiple homestead exemption on his rental properties for years. When unearthed he was allowed to retire as t o keep his nice pension rather than be fired. The Board Chair was a Democrat, the County Board was mostly Democrat and life goes on.
That’s not a tax! It’s just not a deduction, which was primarily used by only the wealthy. So your analysis is truly BS. Even many wealthy people don’t believe that deduction should be given.
It’s equivalent to a tax. Capping the deduction increases the tax, goofus.
Deductions without a cap are not primarily used by the wealthy. In my area, mortgages of 4000 per month are common – early in the loan – that is deductible interest. These taxpayers indeed pay more tax than they would without the cap. I learned my tax from Justice Ginsburg’s husband, and can’t conclude in any way you are correct. Scott, why would you post such incorrect drivel?
Too bad they still don’t still use 1040 EZ form because that is about far as you knowledge of taxes extends. The SALT is a deduction, that is CAPPED. When a deduction is capped, it raises your taxes. It is a de facto tax. Furthermore, the tax discussed in the article is the mansion tax…and that is indeed a tax.
Don’t forget even though the amount of tax you can deduct is capped the standard deduction for couples filing jointly for 2024 is $29,200 up $1,500 from 2023. For single or filing separately is $14,600 and head of household is $21,900.
How many people itemize now with the increased standard deduction compared to when it was lowered? Many people are saving money especially those who do work or have a small home with less in property taxes.
Freddy, lots more middle income people benefitted from that hike in the standard deduction. It’s part of why — and this is interesting — the 2017 TCJA resulted in the wealthiest paying a greater share of the income tax burden than they did before. That and the SALT cap actually made TCJA progressive, though progressives hated it. That’s per this National Taxpayers Union study: who-pays-income-taxes-tax-year-2018 I believe some subsequent studies disagree, but not by much. In any event, TCJA was not the greedy grab by the rich that progressives claimed. And, unquestionably, the SALT cap and big standard deduction were… Read more »
And your anecdotal evidence neglects that there are married couples who both make a decent salary, own a nice home with pretty expensive tax bills. The standard deduction in 2023 is $27,700. So a married couple with an AGI of $400K pay about $20K in state taxes and $15K in local real estate taxes are losers on this deal.
Here in the Rockford/Belvidere homes values have go nowhere for a few decades up until a few years ago. The values are still that of 10-20 years ago or more. My home in any other decent area should be $650-$750K+. I am still barely above the cost to build it in 1994 for $235K now at maybe $290K?. This is for 2,350 sq.ft one story on 2.5 acres. This is the depressing appreciation I got in 30 years. But taxes have gone up every year.
I appreciate this, but you need a graph to explain it better.
Anyone who needs a graph is math challenged.
No, it’s how you communicate effectively. Forcing readers to think really hard about something that could be easily simplified is not productive or persuasive.
SALT tax cap should be linked to inflation. Why should my elderly mother in financially sound Ohio subsidize Illinois, New Jersey, NY public sector union pensions? That’s what the lower cap SALT did. It shifted federal tax revenue from the drunkenly spending high taxation states (generally Democrat run) to the financially frugal low taxation states.
The Alternative Minimum Tax was initially targeted to 8 families who had enormous wealth but paid zero Federal Income Taxes. With the wonders of inflation soon it was targeting the middle class who were generally given relief in the usual budgeting bills. Thee point is though that while this may be a mansion tax today with inflation middle class homes will be in todays “mansion class” pricewise. The politicians know this (it only takes grade school math to figure it out) and soon it will be another tax on everyone.
You are missing the point of Zippie’s mansion tax. Moneys affected by the SALT cap go to the feds. Zippie’s mansion tax would go to him and his buddies to spend.
Of course, but Illinois gets its proportionate share of whatever benefits come from the federal revenue increase from the SALT deduction, which that Wharton piece says is about $1.1 trillion. Illinois’s share, based on its population share, would be over $400 million — 4X the revenue expected from the mansion tax.
Just in Cook County, this affected over 300,000 tax payers. It is amazing that the party that screams, “Tax the Rich!” Despises it so. Mindless hypocrisy!
SALT was good in that it caused pain in high tax high spending progressive states. The owners of those properties could no longer write off high property taxes which in essence were financed by states and locals that managed their fiscal policies more prudently. Progs couldn’t stand it for one more reason; it was instituted by Trump who knew something about real estate taxes.
P.S.; Trump could have named the SALT bill “Bring Property Tax Pain Home.”
I purchased another home and moved from Illinois in 2019. The two homes were the same market price and value. My Illinois property taxes were 4,000 my new home is 680. The difference is Illinois has a behemoth sized govt and public pensions that rob average people of their wealth. You can talk and discuss Illinois corruption for the rest of your life but it will never change for the better. The only solution is to divorce yourself from the problem called Illinois. Sell your property and move while you still can.
They’re not equal homes, buddy. One is in a major metropolitan area with ample job opportunities, events and entertainment while the other is in the sticks.
I live in a 1.2M house and pay 10k in property taxes. The area is more sophisticated than the North Shore, has more job opportunities and clearly is not in the sticks. Our public universities are orders of magnitude better than Illinois. I am from Highland Park, and am aware of the better parts of Illinois. The quality of life and value where I live so outpaces Illinois it isn’t close. Do I need an attitude adjustment because I choose to live here? And how can one state do it while Illinois cannot. , No amount of psych coaching will… Read more »
Let me guess! You’re a high flying executive with a busy schedule. You admittedly have no vested interest in Illinois tax matters, but you love to spend your free time posting long winded emotional responses to property appraisal hypotheticals in an out of state forum? LOL NOT BUYING IT! Last time I challenged this “run away from your problems / move out trope,” a robot outed itself with a comment about saving $20 on licence plates fees! Obviously, no human would make an illogical comment like this. If anyone hasn’t figured it out yet, these folks are all part of… Read more »
I feel deeply for Illinois. Former state champion in athletics (something you could not even dream of doing because, well, talk is cheap and you are not mentally tough) and my roots in Illinois are very deeply grounded. We were considered the best team of all time (not the State son, but the nation, and we didn’t get that way by long winded emotional responses – but you wouldn’t know) and we knew that being in the Chicago area was an important part of that accomplishment. My closest friends today are former D1 athletes from Illinois, and I feel honored… Read more »
ALL of IL’s problems are man made and are directly attributable to the state’s Democrat voters. They’re all F’in idiots and morons. And every problem we have is because they keep voting Democrat over and over again. Which causes the more intelligent people – like yourself – to leave the state entirely, which increases the stranglehold horrible Democrat policies have on the state. People can blame the RINOs and the Combine and our stupid party, but that’s all a side show. The state has been controlled almost exclusively by Democrats for the last 50 years and they own this. And… Read more »