Republican Efforts for SALT Relief Stumble Again: Implications for High-Tax States

Vulnerable Republicans from high-tax states strike out again on SALT

The hopes of Republicans from high-tax states such as New York, New Jersey, and California to broaden the federal deduction for state and local taxes suffered a quiet defeat in a procedural vote on Wednesday afternoon. This setback, by a vote of 195-225, dealt a blow to lawmakers seeking relief from the $10,000 cap on the deduction imposed by the 2017 tax law enacted by Republicans.

The rejection of considering legislation for SALT relief underscored the ongoing frustration of lawmakers from these states. Representative Mike Lawler (R-N.Y.), the primary sponsor of the bill, emphasized the need for immediate tax relief for New Yorkers, urging bipartisan support during the debate preceding the vote.

Lawler’s proposal aimed to address what some call a “marriage penalty” in the SALT deduction by increasing the deduction for married couples to $20,000 for the 2023 tax year, limited to taxpayers earning less than $500,000.

Republican Efforts for SALT Relief Stumble Again: Implications for High-Tax States
Republican Efforts for SALT Relief Stumble Again: Implications for High-Tax States (Credits: AP News)

The lawmakers advocating for this relief represent pivotal swing districts with significant national political implications. This issue featured prominently in Tuesday’s special election on Long Island, where Democrat Tom Suozzi criticized New York Republicans for failing to address the deduction cap in the current Congress.

However, the push for SALT relief has bipartisan complexities. While Democrats from high-tax states also support expanding the deduction, they viewed Lawler’s proposal as inadequate. Representative Bill Pascrell (D-N.J.) criticized the measure as insufficient for middle-class tax relief, highlighting the opposition from Republicans to broader relief efforts.

The debate over the SALT deduction cap revolves around its impact on state and local government spending and its consequences for taxpayers. Prior to its implementation in 2017, taxpayers could deduct their full state and local tax payments from federal taxes, particularly affecting homeowners in states like New York, New Jersey, and California, where property taxes are high.

Lawler’s legislation, estimated to cost around $11.7 billion, predominantly benefits higher-income earners, according to the Tax Foundation’s analysis. The SALT Caucus, comprising members from both parties, has consistently advocated for broader relief measures but has faced challenges from party leadership.

Looking ahead, despite the setback of Lawler’s bill, Republicans from high-tax states are gearing up for another push for SALT tax breaks in 2025, coinciding with the expiration of most of the 2017 tax cuts. Representative Nicole Malliotakis (R-N.Y.) highlighted 2025 as a crucial opportunity for leveraging support for SALT relief measures.