Reps. Mike Lawler, R-N.Y., and Rep. Chip Roy, R-Texas, are in disagreement regarding the state and local tax deduction. The debate over the deduction, also known as “SALT,” is causing a rift within the Republican party in Washington. The deduction allows individuals to deduct up to $10,000 in taxes paid to state and local governments.
Despite a week of discussions and meetings, Republicans have yet to reach a consensus on how to address the SALT deduction. Some Republicans are pushing to raise the $10,000 cap set by the 2017 Trump tax cuts, while others are hesitant to expand the deduction further.
Pro-SALT Republicans are advocating for raising the cap to $15,000 for individuals and $30,000 for married couples. Party leaders are considering options such as setting a higher cap, eliminating the “marriage penalty,” and potentially implementing an income threshold to restrict the deduction to the middle class.
The issue has divided the GOP’s narrow House majority, particularly because some Republicans in high-tax areas lost re-election races in 2018 after supporting the 2017 tax law with the $10,000 cap. A new group of GOP lawmakers elected since then have pledged to increase the cap, but doing so would have significant financial implications and complicate other legislative priorities.
Rep. Nicole Malliotakis, R-N.Y., who is part of the “SALT Caucus,” is working on negotiations to address the deduction. While specific numbers have not been finalized, discussions are focusing on limiting the deduction to families earning less than $400,000 per year and potentially increasing the cap to around $25,000.
The goal is to provide targeted relief for middle-class families without benefiting millionaires and billionaires. Malliotakis emphasized the importance of finding a number that can offer meaningful assistance to middle-class families while being acceptable to fellow committee members.
While a resolution is not expected this week, Malliotakis expressed optimism that a viable solution will eventually be approved by the committee. GOP leaders are aiming to control the cost of any changes to the SALT policy to accommodate other legislative priorities.
The Ways and Means Committee has yet to release the full details of the negotiations surrounding the SALT deduction.
The House GOP leaders are aiming to pass the entire package out of the chamber by Memorial Day, and are keen on scheduling a vote soon, despite Democrats’ concerns over the SALT limits imposed by Republicans. The Democrats view the SALT restrictions as a move to increase taxes on residents of blue states, which could influence swing districts crucial for House control.
Liam Donovan, a lobbyist and former GOP aide, believes that the SALT cap will likely exceed $10,000 but fall short of the $100,000 desired by pro-SALT members. He suggests that a higher cap with an income phase-out could be the best political approach, making it harder for Democrats to argue that it adversely affects middle-class families.
On the other hand, Conservative Rep. Chip Roy of Texas opposes the SALT deduction and criticizes his colleagues for advocating it. He insists that high local taxes should not be subsidized by the federal government, and he would only consider supporting a higher SALT cap if it is balanced with spending cuts.
Meanwhile, Rep. Mike Lawler of New York is pushing for a higher SALT deduction, emphasizing that New York contributes more to the federal government than it receives, unlike many red states. He argues that it is a matter of fairness and that New Yorkers need tax relief.
Fellow New York representatives Elise Stefanik and Nick LaLota are also vocal about their support for increasing the SALT deduction, with LaLota stating that boosting the deduction is crucial to gaining his support for the reconciliation package.
