Tax Reform Showdown: GOP Lawmakers Demand Changes to State and Local Tax Deductions
As President-elect Donald Trump prepares to unveil his highly anticipated tax package, a group of five influential House Republicans from high-tax states is threatening to derail the legislation unless their constituents receive a significant boost to the amount they can deduct from federal income taxes to reflect state and local taxes already paid.
A Firm Line in the Sand
These lawmakers, representing New York, New Jersey, and California, are refusing to back down on their demands, citing the need to protect middle-class families in their districts who are struggling under the current $10,000 cap. “The $20,000 proposal is a nonstarter,” declared Rep. Nick LaLota of New York. “It’s way too low to earn our vote.”
The SALT Caucus: A Powerful Bloc
LaLota is part of a larger congressional state and local tax (SALT) caucus, which has secured support from Trump for their efforts to raise the SALT cap. However, they still need to win over hundreds of fellow Republicans who oppose lifting the cap. The SALT bloc plans to use their collective leverage to push for significant changes to the current provisions.
The Cost of Raising the Cap
One of the main objections to raising the SALT cap is that it would disproportionately benefit wealthier Americans and add billions of dollars to the cost of any tax bill. The Institute on Taxation and Economic Policy estimates that households with incomes in the top 20% would reap the most benefits from a higher cap.
A Middle-Class Concern
However, Rep. Andrew Garbarino of New York argues that his constituents, while having higher incomes compared to the rest of the country, are still middle-class families struggling to make ends meet in high-cost-of-living areas. “I don’t have a very wealthy district,” he said. “These households were hurt when the cap was put in place back in 2017, and we’re looking to right that wrong.”
Finding a Solution
The SALT Caucus is still determining what the new cap should be, but LaLota proposes two options: raising the cap to an undetermined amount and allowing joint filers to deduct twice that, or removing the cap altogether and limiting the deduction to households with income below a specific threshold. As negotiations continue, one thing is clear: these lawmakers will not back down until their constituents receive the relief they deserve.
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