House leaders have agreed to allow a stand-alone vote on the longtime goal of Republicans from blue states of increasing federal deductions for state and local taxes paid, a concession made to gain support for a major tax bill set for a vote Wednesday but that will generate opposition from conservatives.
A vote on the second deal, which leadership has committed to, is expected to be held next week and will involve relief for SALT deductions, two sources familiar with the ongoing and fluid negotiations confirmed to the Washington Examiner.
The initial tax deal set for a vote Wednesday, which expands the child tax credit and restores some prized business tax breaks, was on the rocks on Tuesday when four New York Republicans threatened to tank a procedural vote to protest GOP leaders’ decision not to include SALT changes in the broader legislation.
The second bill is meant to appease those centrist members, who prioritized raising the $10,000 cap on SALT deductions.
Although few details have emerged, the second bill involves a modified version of Rep. Mike Lawler’s (R-NY) SALT Marriage Penalty Elimination Act, according to the sources.
The federal deduction for SALT was capped at $10,000 by the 2017 Republican tax overhaul, and the cap applied to both individual and married filers. Lawler’s bill raises the deduction to $20,000 for married couples who own a home and file jointly.
Lawler and other members of the so-called SALT caucus of Republicans in high-tax states argue that the current arrangement is unfair because single homeowners are able to get a $10,000 deduction, but the deduction for married couples only amounts to $5,000 because they file jointly.
It isn’t yet clear what else would be included in that second stand-alone legislation, although some conservatives have been pushing for there to be provisions that make it harder for illegal immigrants to receive child tax credits.
The initial piece of legislation at the crux of the current negotiations is the Tax Relief for American Families and Workers Act, a $78 billion bill that would expand the child tax credit by changing the calculation of the credit on a per-child basis to make it more generous. It would also increase the maximum refundable amount per child. It also indexes the credit for inflation this year and in 2025.
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The bill also renews a tax deduction for research and development costs for businesses, something that business groups have been lobbying for and the GOP has prioritized. Since the break expired, companies have had to amortize R&D expenses, meaning they faced a higher tax burden.
The legislation garnered broad bipartisan support in the Ways and Means Committee, where it advanced in an overwhelming 40-3 vote.
David Sivak contributed to this report.