As Senate Republicans unveil details of President Donald Trump’s spending package, the fate of the federal deduction for state and local taxes (SALT) remains uncertain. Established by the 2017 Tax Cuts and Jobs Act (TCJA), the SALT deduction currently has a limit of $10,000, set to last until 2025. Previously, this deduction was unlimited for itemizers but was subject to reductions due to the alternative minimum tax, affecting higher earners.
The Senate Finance Committee’s recent proposal maintains the $10,000 cap, contrasting with House Republicans’ earlier approval of a $40,000 limit in May. SALT has been a contentious topic, particularly impacting lawmakers from high-tax states such as New York, New Jersey, and California, who wield significant influence due to a slim House Republican majority.
Filers who itemize cannot claim more than $10,000 in SALT deductions, resulting in what some describe as a “marriage penalty.” Raising this cap has sparked controversy since it primarily benefits higher-income households, while around 90% of filers opt for the standard deduction and do not utilize itemized breaks.
The original SALT cap was designed to help finance other TCJA tax cuts, and some lawmakers advocate for keeping the lower limit for fiscal reasons. Senate Majority Leader John Thune has indicated there isn’t strong interest in changing the current SALT provisions, hoping for a compromise that secures necessary House votes.
However, dissent has emerged among House Republicans regarding the proposed limit. Rep. Mike Lawler labeled the $10,000 cap as “DEAD ON ARRIVAL,” while Rep. Nicole Malliotakis described it as an “insult” to Republican districts contributing to the party’s majority. As negotiations continue, the SALT issue remains a focal point in discussions around the spending package.
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