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The One Big Beautiful Bill Act (OBBBA) significantly increased the State and Local Tax (SALT) deduction cap from $10,000 to $40,000. This revision is expected to have a major effect on federal taxable income, particularly for taxpayers in states with higher tax burdens, by reducing their federal tax liability. Because state tax structures vary widely, the impact of this change will differ substantially across the nation.

Using REMI’s Tax-PI and REMI AI, this session will examine two states with sharply contrasting tax systems: California, which has some of the highest state income taxes, and Texas, which imposes none. The analysis will demonstrate how California may experience increased investment, housing activity and consumer spending in response to the enhanced deductions. Texas, on the other hand, could see little direct benefit and may instead rely on alternate revenue mechanisms such as property taxes or adjustments to standard deductions.

The session will also explore how states may respond to these changes in the short and long term, how taxpayer behavior might shift, and how REMI’s tools can help decision-makers assess these evolving dynamics. Comparing these two case studies highlights why it’s essential to view federal tax policy through a state-specific lens to fully understand its impact.