ACO News: Republican SALT Caucus Debates Raising the SALT Cap
Background:
- The SALT cap (state and local tax deduction limit) is currently $10,000, set by the 2017 Tax Cuts and Jobs Act (TCJA).
- This cap expires at the end of 2025.
- Some Republicans, especially from high-tax states like New York and California, want to raise the cap in upcoming tax legislation.
Pushback Against Early Proposal
- An early proposal to raise the cap to $25,000 was met with criticism:
- Rep. Michael Lawler (R-NY) – A vocal SALT advocate from a high-tax district – called the idea “woefully insufficient.”
- Reps. Andrew Garbarino (R-NY) and Young Kim (R-CA) – Co-chairs of the House Republican SALT Caucus – said the amount “does not get close to bringing relief.”
- Rep. Nick LaLota (R-NY) – Another member from a high-tax district – called it “insulting,” and vowed to oppose any tax bill with a cap that low.
These lawmakers represent districts where many middle-to-upper-income residents are heavily impacted by the current cap.
No Agreed-Upon Target Yet
- While criticizing the $25K figure, lawmakers haven’t agreed on what the new cap should be.
- LaLota: “I haven’t said anything specific other than what won’t work, and 25 won’t work.”
- Lawler and LaLota have pledged to oppose bills that don’t go above $25K.
- Rep. Nicole Malliotakis (R-NY) – A member of both the House Ways and Means Committee and the SALT Caucus – said a cap of $60K or $100K isn’t necessary, and a middle ground might be found.
Legislative Outlook
- Congress passed a joint budget resolution on April 10, allowing work on a reconciliation bill (the legislative vehicle for tax changes).
- Detailed SALT negotiations are expected after the two-week recess.
Alternative Proposals
- Lawler’s bill proposes:
- $100K cap for single filers / $200K for married couples.
- Would last two years and cost $134 billion, per Penn Wharton Budget Model.
- Income-limited options are being considered to lower cost:
- Raising to $20K for joint filers: costs $170B over 10 years.
- If limited to households earning < $500K: cost drops to $110B.
Equity Concerns
- Full repeal of the SALT cap largely benefits the wealthy:
- 93% of the benefit goes to households earning over $200K.
- 43% goes to those earning over $1M.
- (Source: Urban-Brookings Tax Policy Center, 2024 analysis)
Corporate SALT (C-SALT) Option
- House Freedom Caucus has proposed a corporate SALT deduction cap as a revenue offset.
- Could raise $223B over 10 years (or $432B if extended to property taxes).
- This idea is controversial:
- John Gimigliano (KPMG tax policy expert) said it’s politically different from individual SALT debates.
- Douglas Holtz-Eakin (American Action Forum) argued it would “threaten jobs, investment, and wages,” calling it a hidden corporate tax hike.
If you have any questions or would like to discuss 2025 tax planning; contact your Accavallo and Company team member.
