How the SALT Fight Threatens the Republican Tax Bill: QuickTake

For as long as Americans have paid federal income taxes, they’ve been able to subtract some of what they pay to their state and local governments from their taxable income. This federal deduction for state and local taxes — the SALT deduction, for short — has a big influence on how the tax burden is divided. It tends to help taxpayers in wealthier, more urban states, where sales taxes are higher and real estate costs more. President Donald Trump’s first-term tax law, approved in 2017, capped the SALT deduction at $10,000 — the first across-the-board cap on the deduction in its history.

The cap will likely soon change. At the outset of Trump’s second presidency, raising the cap is a key priority for a group of Republican lawmakers who represent districts in high-tax states. As members of Congress negotiate a tax-and-spending bill that will include an extension of the 2017 tax law, which is set to expire in December, this group’s demands are proving influential: a proposed version of the bill released by House Republicans on May 12 includes an increase of the SALT deduction cap to $30,000. However, some members of the “SALT Caucus” have promised to block their party’s signature tax legislation unless the cap is set even higher.

Republicans hold only narrow majorities in both the Senate and the House of Representatives, and party leaders will need to win the support of the group as they work to pass the bill.

President Donald Trump

Source: Consolidated News Photos

Who uses the SALT deduction?

Mainly taxpayers with relatively high incomes — the 10% to 15% of filers who itemize their federal tax returns rather than take a standard deduction. Were the $10,000 cap to be increased or eliminated, at least 90% of the benefits would flow to households making more than $200,000 a year, according to the Tax Policy Center.

Those households are heavily concentrated in states that have traditionally voted for Democrats statewide, such as New York, New Jersey, Connecticut, California and Maryland. Taxpayers in relatively low-tax, traditionally “red” states like North Dakota, South Dakota and Wyoming see less impact from the cap.

However, because a handful of Republicans in the House represent wealthy, high-tax districts in states such as New York, the SALT deduction is not a neatly partisan issue in Congress. Similarly, Democrats are split on the SALT cap — some serve the interests of high-income earners in expensive areas, while most serve a base that wants to make the tax code more progressive. No Democrats are expected to support the broader bill, however.

Why was the deduction capped?

Trump and congressional Republicans enacted the cap to offset some of the revenue lost from their tax cuts, which were implemented in 2018. Then-House Speaker Paul Ryan initially proposed eliminating the write-off altogether. Negotiators eventually landed on allowing $10,000 in deductions to appease Republicans from high-tax states, even as many still voted against the overall compromise.

Who wants the cap increased or removed?

Members of Congress — including more than a dozen Republicans — from high-tax states have indicated they want to increase the write-off’s limit. House Republicans have a narrower majority this year than they did in 2017, giving Republican members of the bipartisan SALT Caucus more leverage with leadership in bill negotiations.

House Republicans’ proposed version of the bill would raise the SALT deduction cap to $30,000 for most people making less than $400,000 a year. Higher earners would be able to claim a smaller SALT deduction, the size of which shrinks the wealthier they are.

The representatives from high-tax states say even those changes would be inadequate. Representative Mike Lawler, a New York Republican, said in a Bloomberg Television interview that he is a “hard no” on the legislation unless the cap is increased. Nick LaLota, another New York Republican, said he was “insulted” by the limit and his would be a “hell no” vote against it.

Three other Republicans — New York’s Andrew Garbarino and Elise Stefanik and Young Kim of California — have previously rejected a $30,000 SALT cap and said they would vote against a bill including such a limit. Some members of the SALT Caucus aim to raise the cap to as much as $124,000.

Are Republicans united on this?

No. Most lawmakers represent districts where few people pay enough in state and local taxes to use the SALT deduction. They find it politically difficult to support what amounts to a tax cut for high earners. Lawmakers are looking for a compromise that lets eligible taxpayers deduct a greater amount of their state and local levies but maintains some limit on the size of the deduction.

Where does Trump come down on the issue?

Since the start of his 2024 campaign for the presidency, Trump has repeatedly said he wants to raise the cap. He promised to “get SALT back” while campaigningon Long Island, New York last year, where Republicans were defending competitive House seats in the state. He also reiterated his desire to change the cap in private meetings with House Republicans at the White House and Mar-a-Lago after his inauguration.

He has taken that stance despite signing the cap into law in 2017. But eight years later, Trump is preparing to defend the slimmest of Republican majorities in the 2026 midterm elections. Giving Republicans in high-tax states a win they can tout to voters could help Trump keep unified control of Washington.

What would repealing the cap cost?

Restoring the full SALT deduction would cost the US Treasury $1.2 trillion in lost revenue over a decade, according to the nonpartisan Committee for a Responsible Federal Budget.

The Reference Shelf

A Bloomberg report that shows a minority of taxpayers would benefit from a SALT cap increase
The Bipartisan Policy Center’s proposals for controlling the cost of SALT deductions
The Tax Foundation’s map showing the average SALT bill by county

To contact the reporter on this story:
Zach C. Cohen in Washington at zcohen38@bloomberg.net

To contact the editors responsible for this story:
William Norris at wnorris8@bloomberg.net