As President-elect Donald Trump prepares a major legislative push after he takes office in less than two weeks, a group of Republicans is threatening to block his tax reform agenda unless the controversial State and Local Tax (SALT) deduction cap is addressed.
These lawmakers, known as the SALT Caucus, are demanding the cap be raised or eliminated to secure their support for Trump’s tax bill, reports The Hill.
This weekend, the SALT Caucus is meeting with Trump to discuss their demands and try to reach a compromise. One key member, Rep. Mike Lawler (R-N.Y.), has made it clear he will not back a tax bill unless the SALT cap is lifted.
The cap, implemented under the 2017 Tax Cuts and Jobs Act, limits deductions for state and local taxes to $10,000 per year.
This has especially affected residents in high-tax states like New York, California, and New Jersey, where taxpayers pay significantly higher state and local taxes.
Lawler, who recently filed legislation to increase the SALT cap to $100,000 for single filers and $200,000 for joint filers, argues that the current cap creates a “marriage penalty” for married couples.
The proposed cap increase would offer some relief to taxpayers in blue states, The Hill writes.
However, the push to lift the SALT cap is creating tension within the Republican Party.
Fiscal conservatives, particularly those in the Freedom Caucus, are opposed to the move, warning that it would increase the federal deficit. They argue that deficit reduction should be a priority, with one member emphasizing that raising the SALT cap would make it harder to reduce the deficit.
To bridge the divide, the SALT-focused Republicans are reportedly no longer calling for a full repeal of the cap but instead are pushing for a raised cap.
They believe this compromise could relieve taxpayers in high-tax states without completely dismantling the cap.
While Trump has supported reversing the SALT cap during his campaign, the challenge will be balancing the demands of the SALT Caucus with the fiscal priorities of other Republicans.
The fiscal conservatives’ concerns about the SALT cap are significant. Experts estimate that raising the cap could add up to $450 billion to the deficit, while completely eliminating it could cost as much as $900 billion, The Hill reports.
With Republicans already aiming for $2.5 trillion in cuts to offset the costs of their tax agenda, the SALT issue is complicating efforts to craft a deficit-neutral or deficit-reducing bill.
The weekend meeting with Trump will be a pivotal moment in the ongoing debate.
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