A proposals to raise the SALT cap has become one of the bargaining chips as lawmakers wrangle and negotiate over the appointment of a new speaker of the House.
House Judiciary Committee Chair Jim Jordan, R-Ohio, agreed to support raising the cap as part of his ongoing effort to become speaker, according to multiple publishes reports. Jordan, however, has failed to win the speakers’s seat in two House votes this week.
Jordan made the deal with GOP congressmen from New York who represent districts that have been hit hard by caps on the federal tax deduction for state, local and personal property (SALT) taxes that were put in place during the Trump administration. The SALT caucus, which consists of Republicans and Democrats from high-tax states like New York and California, has been lobbying to have the cap eliminated since 2021.
As he makes his third run for the speakership, the pressure on Jordan to raise the SALT cap to at least $20,000 per taxpayer or repeal it entirely is unlikely to go away, said Steve Wamhoff, federal policy director at Institute on Taxation and Economic Policy, told Financial Advisor magazine.
“The SALT cap will continue to be a bargaining chip,” said Wamhoff, former senior tax policy analyst for Sen. Bernie Sanders and member of his budget committee staff. “While most people aren’t affected, the wealthy who are have personal relationships with their lawmakers. [They] can get them on the phone and have outsized influence.”
The plan Jordan floated would double the current $10,000 SALT deduction to $20,000 for individual taxpayers and $40,000 for couples who itemize, a move he hopes will persuade holdouts and even Democrats from high-tax states like New York, California and Maryland to vote for his speakership, Bloomberg News reported.
That pressure is likely to continue this weekend as Jordan presses his case a third time and will likely carry over as pressure on lawmakers to pass a SALT cap reduction or even elimination as part of the bipartisan package that is being discussed to extend the child tax credit and several expiring business tax credits, Wamhoff said.
While a long shot, “stranger things have happened,” Wamhoff said of the likelihood of SALT legislation by year’s end.
The Jordan proposal “would cost about $54 billion through 2025 and mostly help those earning over $100,000 annually,” Garrett Watson, a senior analyst at the Tax Foundation, said in an analysis on X, formerly Twitter.
Jordan’s SALT proposal is being geared to last through 2025, after which time the current $10,000 cap, which was enacted with The Tax Cuts and Job Acts of 2017 to pay for other tax cuts, also expires.
But “if a $20,000 cap proposal were made permanent, it would raise revenue after 2025 and total $850 billion over 10 years, as the baseline assumes no cap at all post-2025,” Watson said.
As soon as 2024, the top 1% of earners would see a 0.3% increase in after-tax income while the bottom 80% would see almost no change, he said.
“The distribution effects flip by 2033, as a $20,000 SALT cap is a tax increase compared to current law,” Watson added.
Rep. Andrew Garbarino, a Republican from New York, has been one of the most vocal proponents of eliciting a promise from Jordan to raise or eliminate the cap. Garbarino, who introduced the SALT Deductibility Act of 2023 to eliminate the cap entirely, has scores of bipartisan co-signors. The cap “places an unfair financial burden on middle class Americans,” he said on X.
“I definitely think a SALT cap increase has strong momentum to be one of the top items and negotiating tools to get the new speaker, especially if they need support from Democrats,” said Joanne Burke, a CPA and CFP who owns the wealth advisory firm Birch Street Financial Advisors in Vienna, Va.
“This would be welcome relief for all my clients, across the board,” said Burke, who noted that while Virginia has moderate income taxes, “the real estate taxes cost my clients a lot of money.”
The hardest hit are those who have seen their homes appreciate significantly, but for a variety of reasons, may not be able to afford to buy another home in the area, where even condos and townhouses can cost $800,000 to $1 million, he said.
“The existing $10,000 limit is arbitrary and we’re all waiting for it to just sunset next year,” Burke added.
