22-05-2025
What is SALT? Making sense of the spicy tax fight that's nearly sank the GOP's ‘big beautiful bill'
Everyone knows that too much salt can spoil a dish. This week, Republicans in the House of Representatives had to resolve a heated debate within their party over just how much SALT would spoil the 'big, beautiful bill' that they passed by the narrowest of margins early Thursday morning.
SALT in this case is short for the State And Local Tax deduction, a little known but divisive provision in the tax code that had been one of the thorniest issues for the GOP as it worked to find a consensus on the sprawling legislative plan filled with trillions of dollars in tax cuts and big funding reductions to programs like Medicaid and federal food assistance. A small group of Republican House members had dug in their heels — and tested President Trump's patience — over SALT, threatening the fate of the entire bill. The self-proclaimed 'SALT caucus' ultimately voted yes on the legislation, but only after gaining some last-minute concessions from their colleagues.
Like any tax policy, the details get complicated. But the main thing to know is that SALT lets people who pay a lot in state and local taxes pay less on their federal taxes. It does that by allowing them to deduct the taxes they pay to state and local governments from their taxable income when they file federally. So someone who makes $150,000 in a year, but uses the SALT to deduct $10,000 of what they paid in state and local taxes, is treated as if they actually made $140,000 when it comes to their federal tax liability.
The premise of the SALT deduction is to prevent double taxation and offer relief to people who live in states and cities with particularly high income, property and sales taxes.
For a long time, there was no limit on the SALT deduction, so taxpayers could deduct 100% of the state and local taxes they paid from their federal income. That made it one of the country's biggest tax breaks — resulting in as much $100 billion in lost revenue per year. Currently, though, SALT deductions are capped at $10,000 thanks to a provision in the massive tax and spending bill that Republicans passed during Trump's first term. That change, combined with an increase in the standard deduction that was included in that same bill, have dramatically decreased the number of people who take advantage of the SALT deduction.
Historically, the SALT deduction has overwhelmingly helped rich Americans living in high-tax (mostly Democrat-led) states. That's because they are the ones that carry the heaviest tax burden and, unlike the vast majority of taxpayers, they make enough money that it makes sense for them to itemize their tax deductions rather than take the standard deduction.
Before the cap was put in place, it was estimated that 91% of the benefit went to people with an income over $100,000 in just six states: California, New York, New Jersey, Illinois, Texas and Pennsylvania. With deductions limited to $10,000, SALT is still used 'almost exclusively' by high earners, but they are getting a much, much smaller benefit than they used to.
The SALT cap is set to expire at the end of this year. So if Congress does nothing, they'd effectively be handing a $100 billion annual tax break to rich Americans in the wealthiest parts of the country. Though it doesn't get a lot of attention on the national stage, SALT is a very big deal to members of Congress who represent those areas because their constituents have a huge amount of money riding on where the level gets set.
SALT is the rare issue that doesn't fit the typical partisan dynamics. Republicans usually like tax cuts, but most of the party opposes it because the benefits are concentrated in rich, blue districts. Some progressive Democrats, normally loath to offer relief to the rich, like it for the same reason.
Democrats from well-off parts of California, New York and New Jersey tried, and failed, to get the cap repealed. In recent weeks, some Republican House members from those same states, knowing that a full repeal is unlikely, had taken a stand to try to get it raised — with some proposals calling for lifting it to as high as $200,000 for married couples. While SALT caucus makes up a small share of the Republican caucus, the GOP's House majority is so small that even a handful of dissenters could have blocked the entire spending bill from passing .
The initial draft of the tax portion of the big, beautiful bill would have bumped up the SALT cap to $30,000, with a crucial new restriction that limits the benefit to those making less than $400,000 per year. If that would have become law, it would have meant an additional $915 billion in tax revenue for the federal government over the next decade compared to a scenario where the cap was allowed to expire, according to new estimates from the Congressional Budget Office.
That proposal wasn't generous enough for the SALT caucus, which suggested as recently as Tuesday that it would not support the bill if the cap wasn't raised higher. President Trump reportedly scolded them and other GOP holdouts in a closed door meeting on Tuesday morning, telling them to 'forget SALT' so the legislation could move forward. He later told the media that he's opposed to generous SALT deductions, arguing that 'the biggest beneficiaries' would be Democratic governors from 'very blue states.'
Before the 'big, beautiful bill' went up for a vote on Thursday, Republicans passed an amendment that increased the maximum SALT deduction to $40,000 and moved the income limit to $500,000. That was enough to convince the SALT caucus to vote in favor of the bill, minus one member who 'inadvertently' missed the vote.
The full legislation now goes to the Senate, where it could go through substantial changes to satisfy GOP moderates. It's too early to know whether Senate Republicans will try to alter SALT provisions in the bill, or if any changes they might make would cause the SALT caucus to withhold their support when it eventually comes back to the House for final approval.
