House Republicans Move Forward with Trump’s Tax Legislation — SALT Deduction Remains Unresolved

Rep. Jason Smith, R-Mo., speaks during a House Oversight and Accountability Committee impeachment inquiry hearing into U.S. President Joe Biden on Sept. 28, 2023. Jonathan Ernst | Reuters

House Republicans have advanced trillions of tax breaks as part of former President Donald Trump’s economic package. After debating the legislation overnight, the House Ways and Means Committee, which oversees tax matters, passed its portion of the legislation on Wednesday morning in a 26-19 party-line vote. However, the debate over the deduction for state and local taxes, known as SALT, remains unresolved.

The text released Monday afternoon proposes raising the SALT cap to $30,000 for individuals with a modified adjusted gross income of $400,000 or less. Nevertheless, some House lawmakers continue to push for a higher limit before it reaches a full House vote.

While the SALT deduction is a priority for certain lawmakers from high-tax states, the current $10,000 cap was established to help fund the Tax Cuts and Jobs Act (TCJA) of 2017.

Following the vote, House Ways and Means Committee Chairman Jason Smith, R-Mo., stated that Ways and Means Republicans would “continue to collaborate with President Trump and our House colleagues to get the One, Big, Beautiful Bill that delivers on the President’s agenda to his desk as soon as possible.” A full House vote could occur as early as next week, but experts suggest that significant changes may take place in the Senate.

The House Ways and Means Committee legislation includes several of Trump’s campaign priorities, such as extensions of tax breaks enacted through the TCJA. If passed as drafted, Republicans could also introduce no tax on tips and tax-free overtime pay, although details on these provisions are still lacking.

In lieu of cutting taxes on Social Security, the plan proposes an additional $4,000 deduction for older Americans, which some experts argue may not fully cover Social Security income. The $4,000 deduction is projected to cost $90 billion over 10 years, compared to an estimated $1 trillion for exempting Social Security income from taxes, according to Garrett Watson, director of policy analysis at the Tax Foundation. “Tax filers with no other income sources outside of Social Security would typically see little benefit, while others may experience larger gains from this idea,” he noted.

Additionally, the House Ways and Means bill extends the maximum child tax credit of $2,000 enacted through the TCJA and temporarily raises it to $2,500 per child through 2028. However, some policy experts have criticized the proposed credit design, as lower earners typically cannot claim the full amount. “The proposed legislation did nothing for the 17 million children who are excluded from the current $2,000 credit,” said Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division.