Republicans on May 1 talked about ways to better target an expanded state and local tax (SALT) deduction to individuals who earn less than $400,000 as they attempt to take into account both the tax break's costs and the political expediencies of many lawmakers from New York and other high-tax states, Bloomberg reports.
The $10,000 SALT cap was still unresolved when lawmakers took off on May 1.
Republicans on the House tax panel examined alternatives to target the deduction to middle class taxpayers, New York Representative Nicole Malliotakis said to reporters, Bloomberg reports. The committee members delved into these options, including the overall cap level, the number of years to extend it and the existence of income limits for who will be eligible for the write-off, she said.
“It needs to be adjusted in a reasonable manner where it is targeted to the middle class,” she noted, adding that the Ways and Means Committee would reconvene on the issue the following week. Malliotakis is a representative from Staten Island, Bloomberg reports.
Directing the tax break to middle-class taxpayers could be accomplished via an income limit or though the cap's size, which would limit the benefits going to those with the highest property and income taxes.
Such a SALT change could cost roughly $25 billion per year, Malliotakis said, but that is dependent on the size and duration of the cap adjustment. She stated that she is against any changes to the alternative minimum tax, which could impact taxpayers who are in the middle class.
The talks on May 1 came after an Apr. 30 meeting with pro-SALT members, House Speaker Mike Johnson and Ways and Means Committee Chairman Jason Smith, according to Bloomberg. Committee members left the meeting saying both sides were unable to come up with a deal.
An income limit would lessen benefits for residents from some of the most expensive areas of the U.S.— those locations close to New York City and Southern California—that are most worried about the SALT deduction.
President Donald Trump met with Johnson and other key Republicans at the White House on May 1 to talk about the overall tax package, which is the foundation of Trump's legislative agenda.
The plan will renew Trump’s 2017 cuts, but Republicans might have to make tough choices as they look closely at which new levy reductions to include and whether to eliminate benefit programs such as Medicaid.
The problem is the deduction is a key issue to a small, but vocal, faction of House Republicans representing high-tax areas. A narrow GOP majority means that the pro-SALT members can stop the bill if they view the tax changes are too small for their constituents.