Latest news with #SALTdeduction
Bloomberg
4 days ago
- Business
- Bloomberg
New York's Lawler Stands Firm on $40,000 SALT Cap Deal
New York Representative Mike Lawler said Wednesday he is open to negotiating with the Senate to advance President Donald Trump's massive tax and spending bill, but insisted he would not agree to cut a $40,000 cap on state and local tax deductions, or SALT. 'We negotiated,' Lawler told Fox Business of the House version of the bill. 'That's the deal.'
Forbes
5 days ago
- Business
- Forbes
Inside Congress's Fight Over The $40,000 SALT Deduction Cap
The House of Representatives unveiled and passed the One Big Beautiful Bill Act, and now the bill is with the Senate. One of the key provisions from the House's version is a $40,000 cap on state and local income taxes (SALT) paid by individual taxpayers, which, as Forbes reported, was a last-minute alteration to secure the votes for passage in the House. While beneficial for many taxpayers, CNBC reports that the Senate Finance Committee has provided preliminary versions of some items in their version of the bill, including one that would keep the SALT deduction at $10,000. This article describes the SALT deduction, how the Tax Cuts and Jobs Act of 2017 introduced a cap to the deduction, and why this cap is so contentious during the passage of the One Big Beautiful Bill Act. Section 164 of the Internal Revenue Code highlights the SALT deduction, which allows individual taxpayers to deduct taxes paid to state and local governments. These taxes often include property taxes and income taxes. This means that a taxpayer can lower their income dollar-for-dollar based on the amount of taxes they pay to their local jurisdictions. Importantly, this deduction only applies to the amount paid in state and local jurisdictions, meaning that one cannot deduct their federal income taxes paid. The deduction also allows taxpayers to deduct their state and local sales taxes (in lieu of income taxes). This provision benefits taxpayers in states that levy low income taxes. This deduction is considered below the line, meaning it can only be taken by taxpayers who itemize their taxes. Taxpayers can deduct the standard deduction, which is $15,000 for single taxpayers and $30,000 for married taxpayers, or deduct their itemized deductions. While the federal government does not explicitly require taxpayers to choose what is most beneficial for themselves, the typical taxpayer will deduct whichever is higher, meaning taxpayers only itemize their deductions when they are more than the standard deduction. Thus, even though virtually all taxpayers pay some form of state and local income, property, or sales taxes, not nearly as many explicitly benefit from the deduction since the standard deduction is more financially beneficial. Prior to the Tax Cuts and Jobs Act, taxpayers were allowed to deduct unlimited amounts for SALT. According to the Tax Foundation, this notion led to a substantial cost, upwards of $24.4 billion per year of tax deductions for taxpayers, reflecting lost revenue to the government. The Tax Cuts and Jobs Act dwindled this benefit down to just $10,000 per taxpayer. Furthermore, the legislation significantly increased the standard deduction from $12,700 for married taxpayers in 2017 to $24,000 in 2018. The significant increase in the standard deduction, in conjunction with the cap on what can be deducted, significantly lowered the number of taxpayers choosing to itemize and, consequently, the number of taxpayers who can deduct their SALT paid. The ability to deduct SALT has asymmetric effects on states depending on how much the state levies in taxes. According to the Bipartisan Policy Center, states like California, New York, New Jersey, and Connecticut impose significant taxes on their taxpayers, and they often claim SALT as an itemized deduction. Meanwhile, lower tax states like North Dakota, South Dakota, and West Virginia have a very small percentage of taxpayers claiming a deduction. A key piece of the House's One Big Beautiful Bill Act was to increase the SALT deduction cap from $10,000 to $40,000, as I discussed in a Forbes contributor article. According to SmartAsset, this deduction would also increase annually by 1% through 2033. Thus, the $40,000 deduction would eventually rise to $43,313. However, the legislators also imposed a taxable income cap on the deduction of $500,000 (also increases by 1% annually). This means that as taxpayers make more than $500,000, the $40,000 SALT deduction cap decreases. Despite the deduction's phaseout, all taxpayers, regardless of income level, can deduct at least $10,000. As suggested above, increasing the SALT deduction cap from $10,000 to $40,000 provides substantial benefits for taxpayers living in some jurisdictions over others. Notably, taxpayers living in high tax rate and high property value states tend to receive substantially more benefits for a higher cap than others because those taxpayers are more likely to be spending more than $10,000 in SALT. This notion has provided substantial fuel to the fire in Congress. The Hill reports that many representatives in these high tax states required a higher SALT cap deduction for the One Big Beautiful Bill Act to be narrowly approved by the House. Put differently, absent this increased deduction, it is unclear whether the bill would have been approved by the House of Representatives. However, this provision is very expensive. As I noted in a Forbes contributor piece, the CBO estimates that the One Big Beautiful Bill Act will increase the deficit by $2.4 trillion over the next 10 years, and the CBO estimates that 25% of this increase ($600 billion) can be credited to a larger SALT deduction. FoxNews reports that weighing the costs and benefits has led to substantial infighting among Republicans, with New York House Republican Mark Lawler declaring the bill 'Dead on Arrival' if the SALT cap is not raised from $10,000. It also reports that the $10,000 figure from the Senate Finance Committee was just a placeholder as talks continue about what will be part of the Senate's version of the bill. Despite some of the infighting among the Republican party about the size of the SALT deduction, this issue potentially reflects a rare moment where the disagreements are between states rather than between parties. Even if the One Big Beautiful Bill Act is passed as is, the higher SALT cap would substantially benefit the taxpayers of high-tax states like New York, which Senate Minority Leader Chuck Schumer represents, and California, which former Speaker of the House Nancy Pelosi represents. Interestingly, the House's provision also caps who can receive the full benefit, effectively restricting the increased deduction to those who are not among the highest earners. Given the unique nature of this portion of the bill and the sheer magnitude of the price tag that comes with it, the SALT cap deduction remains one of the most intriguing aspects of the One Big Beautiful Bill Act as it finishes up at the Senate Finance Committee and heads to the Senate floor.
Washington Post
05-06-2025
- Business
- Washington Post
Trump indicates openness to scaling back SALT relief in GOP tax bill
President Donald Trump on Wednesday suggested to Senate Republicans that he is open to a lower limit on tax deductions for state and local taxes than what's included in the House-passed version of his sweeping legislation, according to three people familiar with the matter. In a closed-door discussion with GOP senators, the president indicated that Senate Republicans could raise the cap from the current limit of $10,000 but not as high as the House bill, said the people, who spoke on the condition of anonymity to reflect private conversations. The policy has been a flash point among the GOP caucus ever since Trump's 2017 tax law first capped the deductions on state and local taxes, or SALT. That limit helped the GOP hold the cost of that legislation in check, but moderate Republicans from high-tax states like New York, New Jersey and California have pushed to ease or remove it. The version of the new legislation that the House passed raises the cap to $40,000 for Americans earning less than $500,000 annually and is projected to increase the federal deficit by hundreds of billions of dollars. Trump's comments on Wednesday are expected to give Senate Republicans a boost as they rework the House bill. Republican senators are nearly universally hostile to lifting the SALT cap, as none of them represent the high-tax states hit hardest by it. A White House spokesman declined to comment. 'There really isn't a single Republican senator who cares much about the SALT issue … We don't think that low-tax states ought to be subsidizing high-tax states,' Senate Majority Leader John Thune (R-South Dakota) told reporters on Wednesday after meeting with Trump. Sen. Ron Johnson (R-Wisconsin) also confirmed that SALT was discussed at the meeting, adding: 'I think the president realizes there's nobody here in Republicans in the Senate that support extending that. Again, that's just going to be a bone of contention. The problem we all have is such narrow margins.' Johnson added of Trump: 'He would love to see the Senate improve the bill. He'd be supportive of that. But, he said, but you do this, you lose three votes here. You do that, you lose three votes here. That's the reality we're having to deal with.' Tax policy experts have largely said the cap primarily affects higher-income households. Marc Goldwein, senior vice president at the nonpartisan Committee for a Responsible Federal Budget, said the GOP should lower the cap from $40,000 and extend it to businesses and corporations. 'The right amount of relief is no relief, because there's no particular reason there should be a SALT deduction in the first place,' Goldwein said. But a bloc of House Republicans from blue states have threatened not to vote for the tax bill, the centerpiece of Trump's agenda, if the Senate changes the cap again. They represent enough members to sink the bill if they all oppose it; Democrats are expected to vote against it unanimously regardless. 'If the Senate changes the negotiated number of $40,000 — it will derail final passage of the bill,' Rep. Michael Lawler (R-New York), who helped lead the push to raise the cap in the House, wrote on X. The Senate is expected to propose changes to other provisions and may consider making business tax cuts permanent and adjusting Medicaid and food stamps funding, which could further complicate negotiations. 'We're trying to work with our conference. Obviously, we want the House to be able to recognize the bill when they get it back, but it's also $353 billion to do that one section,' Sen. James Lankford (R-Oklahoma) said. 'That's a very significant cost feature.' Jacob Bogage contributed to this report.
Fox News
05-06-2025
- Business
- Fox News
Blue state Republicans threaten rebellion if Senate changes key provision in Trump's 'big, beautiful bill'
House Republicans in Democrat-controlled states are firing a warning shot at the Senate as it considers President Donald Trump's "one big, beautiful bill." GOP lawmakers in New York and California have been demanding that senators leave the House's increased state and local tax (SALT) deduction cap in the bill, even as members of the upper chamber eye it as low-hanging fruit for saving taxpayer dollars. But those blue state Republicans have made raising the current $10,000 SALT deduction cap an existential issue, arguing it provides much-needed tax relief to people in high-cost-of-living areas. The SALT deduction allows people living in areas with high state and local taxes to deduct those penalties in their federal tax filings, up to a point. "When did taxing income that's already been taxed become a Republican ideal? Our party has always stood for lower taxes and a fair, commonsense tax code. We worked in good faith with House leadership to secure a fair deal that provides our constituents with much-needed SALT relief," SALT Caucus co-chairs Reps. Young Kim, R-Calif., and Andrew Garbarino, R-N.Y., said in a statement. "Hardworking families we represent are penalized by the SALT cap, and this deal keeps the President's commitment to fix this issue and has the support of firefighters, police, small businesses and working Americans who keep our country moving." House Republicans can afford little dissent with their razor-thin majority to still pass the bill again, if the Senate returned a modified version – something the SALT caucus pointed out. "The Senate would be remiss to forget that the path to 218 — and delivering for the American people — runs through the SALT Caucus," the statement read. The House-passed budget reconciliation bill – aimed at advancing Trump's priorities on tax, energy, defense, immigration, and the national debt – raises the SALT deduction cap to $40,000. Rep. Nicole Malliotakis, R-N.Y., a SALT Caucus member and one of the House's GOP tax-writers, sent in a statement to Fox News Digital, "The State and Local Tax (SALT) deduction negotiated in the House should NOT be altered by the Senate. It's a Republican principle to allow taxpayers to keep more of their hard-earned money and taxpayers in New York and other SALT states deserve not to be double taxed by their government, especially when we also supported significant savings by rooting out waste, fraud & abuse in our states." Rep. Mike Lawler, R-N.Y., who also fought for the increased cap, signaled he would not support the bill if the Senate reinstated the lower number. "NY, NJ, and CA have and continue to subsidize many of the states represented in the Senate Republican conference. Furthermore, SALT has been used as a payfor for other provisions in the bill, including the doubling of the standard deduction, which is to the benefit of all Americans," Lawler wrote on X. "Since the last tax bill, 29 states have blown past the 10k cap. This isn't a red vs blue issue, it's an issue of double taxation. Since when do Republicans advocate for taxing you on top of taxes already paid? No SALT. No Deal." Senate Majority Leader John Thune, R-S.D., met with Trump to shore up support for the tax portion of the budget reconciliation bill, and said he recognized SALT was a key issue for blue-state Republicans in the House – but it was one that didn't really move the needle for Republican senators. "We also start from a position that there really isn't a single Republican senator who cares much about the SALT issue," Thune said. "It's just not an issue that plays. Most of our states, we're states that are low-tax states, and we don't think that low-tax states ought to be subsidizing high-tax states." Indeed, no Senate Republican hails from a blue state, making the issue for many lawmakers in the upper chamber a moot point. And Thune's position echoes that of many in the House GOP who were wary of increasing the SALT cap. Still, Thune and Senate Republican leadership acknowledge that whatever tweaks and changes to the budget bill that they make have to pass muster with their colleagues in the House. Speaker Mike Johnson, R-La., told reporters Thursday morning that he is still keeping SALT lawmakers "calm." The speaker added that he had been urging the Senate to keep the House's bill intact. "Look, the Senate Republicans are from red states, right? They feel the same way that I do about SALT, but I'm being very deliberate in reminding them that we have, again, this very delicate balance to maintain over here, and you've got to address the issue so that our members can take something home," Johnson said.
Bloomberg
05-06-2025
- Business
- Bloomberg
Elon Musk Is Trying to ‘Kill' Trump's Tax Bill
Good morning. Elon Musk is on a mission to 'kill' the president's tax bill. Germany's new chancellor is the latest leader to seek Donald Trump's ear. And how long would you wait for a Switch 2? Listen to the day's top stories. Elon Musk is trying to block Donald Trump's tax bill after trying, and failing, to convince Republican lawmakers to preserve tax credits for electric vehicles. Meanwhile, Trump and Republican senators have discussed ways to scale back the $40,000 SALT deduction in the House version of the bill.
