As tax discussions ramp up, Republicans have compiled a lengthy menu of options, including five that would revise the deduction for state and local income taxes (SALT). One proposal would do away with the deduction entirely for both individuals and businesses — with an estimated savings of $1 trillion over 10 years.
The list, shared by Senate Finance Committee Ranking member Ron Wyden (D-OR) on Friday via Bluesky, lays out the many choices lawmakers will face as they decide how to extend the 2017 Tax Cuts and Jobs Act (TCJA, P.L. 115-97) tax cuts without escalating the nation’s debt crisis.
The individual SALT deduction, which was limited to $10,000 annually by the TCJA, has emerged as a likely roadblock in tax bill negotiations. A bipartisan group of lawmakers from high-SALT, “blue” states opposed any extension of the so-called SALT cap.
But that hasn’t stopped Republican leadership from including several proposals to limit — or eliminate — the SALT deduction in forthcoming tax legislation.
The most drastic proposal would repeal the SALT deduction entirely after 2025, for both individuals and businesses. The menu also includes a proposal to eliminate the deduction for businesses — but that option would only bring an estimated $310 billion in savings over 10 years, as opposed to $1 trillion in savings with a universal repeal.
Also on the menu is extending the current $10,000 cap but allowing married couples to deduct twice that amount, or increasing the cap to $15,000 for individuals and $30,000 for couples. These proposals come at a cost of $100 to $200 billion, and $500 billion, respectively.
The final option would limit the deduction to state and local property taxes (versus income and sales taxes), which comes at a cost of $300 billion relative to a TCJA extension.
SALT-specific legislation. However, SALT proponents, too, seem to have a menu of options.
A bipartisan bill was introduced last week that would allow taxpayers an unlimited SALT deduction. The Securing Access to Lower Taxes by ensuring (SALT) Deductibility Act, led by Representatives Andrew Garbarino (R-NY) and Brad Schneider (D-IL), would cut Code Sec. 164(b)(6), which was added by the TCJA to establish the $10,000 SALT deduction cap for the 2018-2025 tax years.
The bill is co-led by Representatives Josh Gottheimer (D-NJ), Young Kim (R-CA), Rob Menendez (D-NJ), Chris Smith (R-NJ), Mike Lawler (R-NY), and Tom Suozzi (D-NY). Additional lawmakers from California, Illinois, New Jersey, and New York have signed on, as well as lawmakers from the District of Columbia and Maryland.
Garbarino said the group is “calling for a full repeal of the cap that disproportionately impacts middle-class families in our districts.”
“The unfair SALT cap imposed by President Trump and Congressional Republicans in their 2017 tax bill effectively double-taxes citizens in states like Illinois — imposing a federal levy on taxes paid to state and local governments,” Schneider told Checkpoint. “This onerous burden can only be fully rectified with a full repeal of the SALT cap, something that I’m encouraged President Trump has seemingly put on the table.”
“Beyond just fixing the SALT cap, the tax debate before Congress is a perfect opportunity to collaboratively structure our tax code to help hardworking families all across the nation and create policies that will stand the test of time,” added Schneider. And that can only be achieved through “bipartisan negotiations,” he explained, “rather than unilaterally pushing through a hyper-partisan reconciliation bill.”
Meanwhile, Lawler reintroduced the SALT Fairness and Marriage Penalty Elimination Act (H.R. 232) days earlier. That bill would increase the SALT deduction cap to $100,000 for single filers and $200,000 for married couples filing jointly.
And Representatives Lauren Underwood (D-IL) and Sean Casten (D-IL) offered an approach to tackling the SALT cap that aligns with one in the Republicans’ menu. Their SALT Fairness for Working Families Act (H.R. 246), reintroduced January 9, would increase the cap to $15,000 for single filers and $30,000 for married couples filing jointly.
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