Republicans target $25,000 SALT cap as Trump tax plans solidify

Republicans are in the process of drafting a tax bill behind closed doors that includes an increase of the state and local tax deduction to as high as $25,000 for an individual, according to people familiar with the plan.

A sizable increase to the current $10,000 limit on SALT write-offs would represent a major political victory for a crucial group of swing-district House Republicans representing the New York City area and southern California, who have made their votes for a broader tax cut bill contingent upon securing a bigger deduction.

The plan, which is still in the process of being drafted and is not final, also includes a renewal of President Donald Trump’s 2017 tax reductions for individuals and closely held businesses as well as some of his campaign tax pledges, the people said, requesting anonymity to discuss private matters. 

Republicans are considering offsetting the increase to the SALT cap by reducing the deductions corporations can claim on the state and local taxes they pay, the people said.

The president has not yet been briefed on this proposal, but the draft represents progress on the top legislative agenda item for Republicans. The party is aiming to pass the legislation by August at the latest, as lawmakers rush to provide a counterweight to the potential economic damage and market downturn from the White House’s tariff policies.

Trump administration aides and Senate Finance Chairman Mike Crapo’s team are taking the lead on writing the plan, the people said. 

Crapo has cautioned that “until the bill is drafted, everything is on the table and nothing’s on the table.”

The White House and the Treasury Department did not immediately respond to requests for comment.

On the campaign trail, Trump promised to eliminate taxes on tipped income, overtime pay and Social Security benefits. The plan will aim to deliver on at least two of those pledges, according to the people familiar.

If Republicans end up including Trump’s Social Security idea, they’ll limit the tax breaks to only apply to incomes below a certain threshold, the people said. Senate rules also limit tax reductions related to payroll levies, so Republicans may need to develop a workaround for seniors that does not directly eliminate income taxes on benefit checks.

Trump’s no-taxes-on-tips idea is the most fleshed-out policy, the people said. 

The Senate is still in the process of negotiating a resolution that will dictate the overall size of the tax cuts and any spending reductions in the final bill. Both chambers of Congress will need to pass identical versions of that measure before official negotiations on the tax cuts can begin.

Crapo’s staff and administration aides are compiling a draft of the tax bill now so that Republicans will largely be on the same page after Congress approves the budget resolution. The Senate plans to vote on the budget, which will also include an increase to the debt ceiling, in the coming days, with the House following next week.

The proposal will also roll back parts of the Inflation Reduction Act, signed by President Joe Biden, as a means to offset some of the cuts.