The House Rules Committee advanced legislation that would expand federal deductions for state and local taxes paid, a measure negotiated by New York Republicans in return for their support on a broader tax legislative bill.
The Rules Committee on Thursday reported out a rule to allow for consideration of SALT legislation on the floor. The bill was a modified version of Rep. Mike Lawler’s (R-NY) SALT Marriage Penalty Elimination Act, which changes the structure of the SALT cap by doubling the cap for married joint tax filers.
The bill was reported out of the Rules Committee with an 8-5 vote. It isn’t clear when it will come to the broader House for a floor vote, although two sources familiar with the matter told the Washington Examiner on Wednesday that it is expected next week.
The Rules Committee hearing came less than 12 hours after the House passed the bipartisan child tax credit and business bill in a 357-70 vote.
Some centrist Republicans from New York were upset that a change to the SALT cap was not included in the broader tax bill and threatened to tank an unrelated procedural vote in protest. To appease them and get their votes, House leadership allowed the SALT sidecar bill to proceed.
The federal deduction for SALT was capped at $10,000 by the 2017 Republican tax overhaul, and the cap applies to individual and married filers. Lawler’s bill would raise the deduction to $20,000 for married couples who own a home and file jointly.
Lawler and other members of the SALT caucus of Republicans in high-tax states argue 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.
The increased $20,000 threshold would apply to joint filers whose adjusted gross income is less than $500,000, according to the text of the legislation.
“Our constituents need immediate tax relief because of the failed economic policies of Joe Biden,” Lawler said during the hearing on Thursday. “Inflation has crippled our economy. The cost of living has skyrocketed. The cost of energy has skyrocketed.”
It is unclear whether the bill will pass in the House, which is tightly divided. Many Republicans don’t support changes to the SALT cap because they see it as a tax break for the wealthy. Still, many Democrats in high-tax states support raising or removing the cap.
The broader tax package passed Wednesday night expands the child tax credit, long a Democratic priority, and renews some business tax deductions that Republicans have been pushing for.
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The $78 billion bill enhances the child tax credit by changing the calculation of the credit on a per-child basis to make it more generous. It also increases the maximum refundable amount per child and indexes the credit for inflation this year and in 2025.
The broader package faces uncertainty in the Senate, where lawmakers, keenly aware that it is an election year, will further scrutinize the legislation. If the tax package passes the Senate, the White House has indicated President Joe Biden will sign it into law.