President-elect Donald Trump has given congressional Republicans the green light to negotiate the state and local tax (SALT) deduction as part of a new tax relief package, with the goal of giving relief to some Americans while not giving tax breaks to the wealthy.
Trump met with blue state GOP lawmakers from the House SALT Caucus, who oppose the current $10,000 SALT deduction cap.
The cap hurts residents of states with higher state and local tax rates, as well as those with higher incomes.
"I think it was productive and successful," Rep. Nicole Malliotakis (R-NY) said of the meeting. "The president supports our efforts to increase the SALT deduction. He understands that mayors and governors in blue states are crushing taxpayers and wants to provide relief from the federal level."
Trump knows he needs to find the sweet spot between giving relief to squeezed middle-class taxpayers and avoiding relief for the wealthy who people perceive don't really need it.
"He gave us a little homework to work on, a number that could provide our middle class constituents with relief from the high taxes imposed by our governor and mayor, and at the same time, you know, something that can build consensus and get to [a 218-vote majority]," Malliotakis said.
"I think we pretty much know that it's not going to be a complete lifting of the SALT cap. There’s not an appetite within Congress or even among American taxpayers to lower taxes for the ultra-wealthy.
"Our efforts are really targeted to middle-class families, and that's what we're focused on in trying to achieve the right balance."
But Trump recognizes that some of his constituents were ill-served by the SALT cap, and he has spoken previously about making that right.
He posted on Truth Social last September that he would "get SALT back, lower your taxes, and so much more."
The negotiation is part of a massive reconciliation bill that needs to please nearly every Republican in order to pass without any Democrat support.
The Republican majority in the Senate is bigger than that in the House, which is only two seats until at least April.
Monday on his Verdict podcast, Sen. Ted Cruz (R-TX) suggested that a good compromise to the SALT issue could be ending the marriage penalty on the deduction.
Currently, the cap is $10,000 whether filing single or married joint. Making the married joint cap $20,000 would equalize the cap for married couples while not extending tax relief to those with very high incomes in most cases.
