Rep. Mike Lawler (R-NY) proposed a tenfold increase of the cap on federal deductions for state and local taxes, an opening salvo in crucial negotiations with President-elect Donald Trump and House Republicans.
On Wednesday, Lawler reintroduced his SALT Fairness and Marriage Penalty Elimination Act, which would dramatically hike the SALT deduction cap from $10,000 to $100,000 for single filers and would eliminate the so-called marriage penalty, allowing married couples filing jointly to deduct up to $200,000.
Lawler said that while his ideal scenario would be the full elimination of the cap, which is set to expire at the end of this year, lifting it would still be a boon to his constituents.
“For too long, the people of the Hudson Valley have shouldered the weight of some of the highest taxes in the nation,” Lawler said. “Lifting the cap on SALT will provide relief to millions of New Yorkers and go a long way towards curbing out-migration to states with lower taxes and a better cost of living.”
The bill’s reintroduction comes just days before Lawler and other key Republican lawmakers from high-tax states will descend upon Mar-a-Lago to meet with Trump and discuss what changes should be made to the SALT cap as part of the major fiscal policy bill that Republicans hope to pass through the reconciliation process, which allows them to sidestep the filibuster in the Senate.
Reps. Nicole Malliotakis (R-NY), Nick LaLota (R-NY), Andrew Garbarino (R-NY), Tom Kean (R-NJ), and Young Kim (R-CA) will all be traveling with Lawler to meet with Trump.
The current $10,000 cap was included as a pay-for in Trump’s 2017 Tax Cuts and Jobs Act. Most Republicans, especially those in low-tax states, don’t support raising the SALT cap. But last year, Trump said he supported expanding the SALT cap, a reversal of his own policies and political for Republicans who might not have been open to budging on the matter.
Because of Republicans’ slim majority in the House, the GOP cannot afford to lose votes on the pending tax legislation, so the small group of Republicans who support lifting the SALT cap now have outsize influence. It should also be noted that Trump could use SALT cap relief as a carrot to get the centrist group of Republicans to vote for other aspects of the reconciliation bill.
Ahead of the bill’s reintroduction, Lawler asserted during a Wednesday Bloomberg podcast that the group of SALT lawmakers is a “powerful coalition” given the wire-thin majority that Republicans have in the House.
The question that dominates now is how high the SALT cap would need to be raised in order to appease the group of Republicans. For instance, LaLota said that doubling it to $20,000 isn’t enough to earn his vote.
But increasing or allowing the SALT cap to expire has critics in both the Republican and Democratic parties who argue doing so would be unfair to the majority of taxpayers and would do little for the middle class.
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A study from the Tax Policy Center found that only about 9% of households would benefit from a full repeal of the cap. Additionally, TPC found that the highest-income 20% of households would receive more than 96% of the tax cut.
Also, allowing the SALT cap to expire would cost the government $1.2 trillion over the next decade, according to calculations by the Tax Foundation — an enormous and politically unpalatable cost.