WHERE ARE WE HEADED NOW? The SALT caucus certainly has leverage in its quest to raise the cap, against the better judgment of the vast majority of the Senate Republican conference and many of their House colleagues who live in lower-tax areas. It’s not just that GOP leaders simply can’t punt the support of blue-state Republicans, like they largely did in 2017, when close to a dozen House Republicans from California, New Jersey and New York opposed the Trump tax cuts because of the SALT cap. No, the SALT caucus has a more structural advantage — the $10,000 cap expires entirely if the GOP can’t find a way to extend the temporary provisions from the Tax Cuts and Jobs Act, which would once again allow for unlimited writeoffs for state and local taxes. That’s something they’re not shy in noting, either, as our Emily Ngo and Benjamin also noted over the weekend. In fact, Rep. Mike Lawler (R-N.Y.) is now saying that doubling the cap for joint filers to $20,000 isn’t nearly enough, even though that was a proposal the SALT caucus coalesced around not even a year ago. (Lawler has introduced a bill that would cap state and local deductions at $100,000 for individuals and $200,000 for joint filers.) But even then, it’s not clear yet just how on the front foot the blue-state Republicans are right now. For starters, allowing the individual parts of TCJA to expire would also restore the reach of the Alternative Minimum Tax, which would blunt the impact of bringing back full SALT deductions — as a source familiar with the negotiations pointed out, while noting that the SALT caucus was committed to getting a tax bill accomplished this year. (The AMT, as its name suggests, is basically a second tax system, created to make sure that the better off don’t take too much advantage of tax breaks to lower their bills.) All this helps explain why those closely watching tax negotiations are split over how difficult it might be to reach an understanding on SALT. A solution could look fairly simple: Ending the SALT cap’s so-called marriage penalty could cost around $175 billion over a decade, or even as little as $110 billion if particularly wealthy taxpayers aren’t allowed to claim it. A range of experts have also pointed out that other SALT changes could be used to offset the cost of raising the current cap, like limiting how much corporations can write off their state and local taxes, which could help ease the concerns of deficit hawks in the GOP. But it’s also not hard to see how negotiations over SALT get more complicated, particularly if the blue-state Republicans push for a larger amount of relief and as Republicans engage in the heavy amount of horse-trading that might be required to pass all of their fiscal priorities this year. On that note: It’s worth noting, again, that even more modest SALT relief — like the $20,000 cap for married couples — almost exclusively helps higher-end households. Representatives from states like New Jersey and New York, meanwhile, will argue that even middle-class homes in those states can rack up $10,000 in property taxes.
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