House Bill Proposes $30,000 SALT Cap as Draft Enters Crucial Week

Bloomberg contributor and former Republican Congressman Patrick McHenry breaks down the deep divisions over the SALT tax and Medicaid as key House committees prepare to mark up Trump's tax and spending agenda.

The House tax committee’s draft bill to renew President Donald Trump’s tax cuts calls for increasing the state and local tax deduction to $30,000 for couples, but limits the write-off to households earning $400,000 or less, according to a person familiar with the matter.

Individuals earning up to $200,000 could claim $15,000 in SALT deductions under the proposal, the person said.

That’s just a fraction of what SALT advocates in the House want, according to another person familiar with the negotiations. A group of lawmakers — largely from New York, New Jersey and California — most committed to expanding the tax break want a $62,000 deduction cap for individuals, or twice that for couples, the person said. They also demand those levels are indexed for inflation in future years, and that the higher limits are available for taxpayers starting in 2025.

The language to raise the current $10,000 cap falls short of what many lawmakers in high-tax states have advocated. The imposition of income limits on the tax break is also likely to spark pushback among Republicans from high-earning districts.

The talks remain fluid as lawmakers continue to debate the details of the package, said another person, who requested anonymity to discuss private conversations.

House Speaker Mike Johnson told reporters Monday that no final SALT limit had been set yet. The House Ways and Means Committee is slated to debate the legislation Tuesday.

“There were lots of numbers discussed,” he said, following a meeting with lawmakers concerned about the tax break.

Several lawmakers — including New York’s Mike Lawler, Nick LaLota, Andrew Garbarino and Elise Stefanik and Young Kim of California — have previously rejected a $30,000 SALT cap, calling it insufficient.

Those lawmakers have said they would be willing to block Trump’s entire tax agenda if SALT is not increased substantially.

A lack of consensus on SALT threatens to sink the bill given narrow a Republican majority.

The SALT issue has been one of the most contentious for the House GOP to resolve as party leaders try to ram a multi-trillion-dollar tax cut package through the House in May. The larger the cap adjustment is, the less money there will be for other tax cuts on the Republican agenda.

House Republicans are trying to keep revenue losses from their tax cut package down to a self-imposed limit of $4.5 trillion. They are also aiming for $2 trillion in spending cuts.

The ceiling must accommodate a nearly $4 trillion extension of the expiring 2017 Trump tax cuts as well as new cuts to taxes on tips and overtime. Republicans also want new tax breaks for seniors, car buyers and businesses building factories in the US.

The amount of new tax cuts could be higher if the tax-writing Ways and Means Committee eliminates green energy tax breaks under its jurisdiction.

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