GOP lawmakers from blue states are digging in for a fight with fellow Republicans over raising the cap on state and local tax deductions on federal income taxes.
The state and local tax, or SALT, deduction is one of a handful of intra-party issues roiling Republicans as they try to craft a sweeping tax cut package extending and expanding upon breaks enacted during President Trump’s first term.
Several tax cuts on individuals and small businesses enacted in the 2017 Tax Cuts and Jobs Act are set to expire at the end of the year. Also set to expire is the $10,000 cap on the SALT deduction that Republicans included in the 2017 law to help lower the cost of the tax cuts.
Lawmakers from high-tax blue states like New York, New Jersey and California have opposed the cap and have pushed for years to repeal it or at least increase it to provide some relief for their constituents.
Mr. Trump has sided with Republicans who want some SALT relief but has not prescribed a specific solution. GOP leaders and tax writers have been trying to find a compromise that can pass through the narrow House and Senate majorities.
Bloomberg reported earlier this week that Republicans are increasing the SALT deduction cap to as high as $25,000 for an individual.
On Friday, Reps. Young Kim of California and Andrew Garbarino of New York, the Republican co-chairs of the SALT Caucus, put out a statement making clear that would not be enough to earn their support.
“A $25,000 SALT cap does not get close to bringing relief to families unfairly burdened by the current cap,” the lawmakers said. “We remain committed to working with our colleagues to fulfill President Trump’s promise to address this pressing issue, and we look forward to a serious discussion.”
Rep. Mike Lawler, New York Republican and fellow SALT Caucus member, agreed. He said in a social media post that “$25,000 is woefully insufficient and does not provide the needed tax relief our constituents deserve.”
“Any tax bill that does not fix the cap on SALT will not have my vote,” Mr. Lawler said.
A Tax Policy Center analysis released earlier this year found an even more modest proposal to raise the SALT cap to $20,000 would cost $225 billion over a decade and less than 1% of all households making $200,000 or less would see any benefit.
Republicans who oppose raising the SALT cap say it disproportionately benefits higher earners, but lawmakers from high-tax states say that doesn’t factor in the higher cost of living in their areas.
Mr. Lawler said he spoke to House Speaker Mike Johnson, Louisiana Republican, and Ways and Means Chairman Jason Smith, Missouri Republican, earlier this week and made clear that the SALT Caucus needs to be at the negotiating table.
“They agreed,” Mr. Lawler said.
There are more than enough Republican SALT Caucus members in the narrowly divided House to block the tax cuts, which are part of a larger budget reconciliation package the GOP is planning to use to pass Mr. Trump’s legislative agenda.
But there are also more than enough Republicans opposed to raising the SALT cap who could threaten to sink the package as well, making the issue a troublesome one for GOP leaders trying to balance competing priorities.
House and Senate Republicans are in the early stages of working on the details of the tax cuts, as they first need to adopt a unified budget blueprint laying out tax and spending targets to follow in drafting the reconciliation legislation.
The Senate is voting on the latest version of the budget blueprint this weekend, which House leaders hope to get through their chamber next week.
