Speaker Mike Johnson has indicated that House Republicans are making significant progress toward resolving a controversial tax provision issue linked to the state and local tax (SALT) deduction. This provision, a major hurdle in the GOP’s ‘big, beautiful bill,’ involves increasing the current $10,000 cap on the SALT deduction, with discussions underway to potentially raise it to $30,000 as outlined in a draft released by the Ways and Means Committee. Johnson confirmed that the SALT issue is close to being resolved, though it may not be finalized by Tuesday night. He also highlighted that the ‘marriage penalty’—a term referring to the current deduction not doubling for joint filers—is part of the ongoing negotiations.
House GOP leaders and the so-called SALT Republicans from high-tax blue states are engaging in discussions to further boost the limitation on the state and local tax deduction. These talks are underpinned by the additional fiscal space provided by the GOP’s tax bill, which operates within a $4 trillion cost target. According to two Republicans with direct knowledge of the matter, this fiscal flexibility is a key factor in the ongoing negotiations. The proposed deduction, capped at $30,000, is subject to a phaseout for those earning more than $400,000. However, some Republicans advocate for a higher cap, potentially north of $60,000 for individual filers, to better address the needs of high-income residents.
Despite these developments, the issue remains one of the most contentious aspects of the megabill. Ways and Means Republicans have been weighing the potential consequences of expanding the SALT deduction, with many in the GOP conference expressing concerns about the fiscal impact and the fact that the benefits would primarily accrue to residents of Democratic states. Johnson emphasized that the SALT problem is not only a fiscal challenge but also a political one, as it has sparked significant debate within the party and with allies in the blue states. The resolution of this issue could have far-reaching implications for the overall tax reform agenda and the broader political landscape.