The Freedom Caucus suggests raising corporate taxes to ease SALT deduction caps for individuals, stirring debate among lawmakers.
Washington, D.C.: So, the House Freedom Caucus has come up with a plan. They’re saying to lawmakers from California, New Jersey, and New York, “How about we raise corporate taxes a bit if you ease up on the SALT deduction cap for individuals?”
This proposal means that Republicans from blue states would have to agree to limit the state and local tax deduction for corporations. In return, they’d get a break on the deduction cap for families. Sounds like a trade-off, right?
Andy Harris, the chair of the Freedom Caucus, mentioned that many in the group would be okay with this compromise. But not everyone is on board. Some Republicans, especially those focused on SALT, aren’t keen on swapping one penalty for another.
It’s a tricky situation. House Speaker Mike Johnson is pushing for a big tax and energy package, and both sides have a lot of power in the House with the slim GOP majority. A group of New Yorkers is particularly adamant about increasing the SALT deduction cap, but that could get pricey and isn’t popular with many Republicans.
Some lawmakers believe that if they want to raise the SALT cap, they’ll need to find cuts or hikes elsewhere to balance it out. Ralph Norman from South Carolina pointed out that it’s going to take a lot of discussion to figure this out.
Meanwhile, Senate Finance Committee Chair Mike Crapo acknowledged that they’re working through these SALT trade-offs. It’s a tough nut to crack, with opinions on both sides.
The Freedom Caucus’s idea could mean higher taxes for companies in states like New York and California, which isn’t sitting well with many in the GOP who don’t want to raise the corporate tax rate.
Currently, companies can deduct unlimited state and local taxes from their federal taxes. If they stop being able to deduct state corporate income taxes, it could bring in a whopping $192 billion over ten years.
But lifting the SALT cap for individuals would cost a staggering $1.2 trillion over the same period. Doubling the cap for married couples would still be a hefty $225 billion. It’s a lot to juggle, and there’s no clear agreement on how much to raise the cap.
Even President Trump weighed in, telling New York Republicans to negotiate a “fair number.” But it seems like every meeting brings new changes to the discussions.
As the deadline for a budget resolution looms, House GOP leaders are stressing that they need to nail down the SALT issue to plan their next steps. Jason Smith, the chair of the Ways and Means Committee, is optimistic that they’ll find common ground.
