The U.S. Senate has released its first draft changes to President Donald Trump's "big, beautiful bill," which has already received House approval. A key issue, however, remains the deduction for state and local taxes (SALT), set at $10,000 under the 2017 Tax Cuts and Jobs Act.
SALT deductions have been around since 1913 and allow taxpayers to deduct the cost of some of the state and local taxes they pay from their federal tax bills. This issue has drawn significant concern from Republicans representing high-tax states like New York and California, where many constituents feel the pinch of limited deductions.
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Senate Republicans have proposed lowering the already negotiated $40,000 SALT cap, a compromise made with blue state Republicans, back down to $10,000. This drastic reduction has triggered a backlash among some House Republicans, who made it clear that this new cap is unacceptable and are threatening to sink the bill.
Rep. Nick Lalota of New York articulated this frustration, stating, "Anything less than a $40,000 will result in my 'no' vote. $39,999.99 would result in a 'no' vote from me. I've been clear about my communications with my own leadership, with the Senate over there. That was a hard-fought negotiation that happened for four months, and $40,000 was the compromise number."
The stakes are high as Lalota highlights that failure to reach the $40,000 cap could result in returning to unlimited SALT deductions. If no agreement is reached before the provision from the 2017 Tax Cuts and Jobs Act expires at the end of this year, Republicans face significant pressure to act.
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As they push forward with the One Big Beautiful Bill Act, the Republican majority's slim margins loom large, with the outcome of this debate potentially deciding the future of their tax reform efforts. If those five GOP members advocating for a higher SALT deduction succeed, the bill could face a rocky road ahead. Meanwhile, the Senate has indicated it won't easily concede to these demands.
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