The Republican-led Senate Finance Committee plans to keep the cap on state and local tax (SALT) deductions at $10,000, a move that could hit California residents hard. This limit, set in the 2017 GOP tax overhaul, replaced a system that had no cap — and it’s been a sore spot for taxpayers in high-tax, mostly Democratic states ever since.
Last month, the House approved a bill to raise the SALT cap to $40,000 for individuals earning under $500,000. But the Senate isn’t eager to follow suit.
Related posts
“The tax code never should have contained a cap on the SALT deduction in the first place,” said Rep. Mike Thompson, D-St. Helena. “Suggesting we keep the current cap is an insult to Californians.”
Thompson, who leads Democrats on the House Ways and Means tax policy subcommittee, argued that maintaining the current cap “unfairly punishes California and other states like ours.”
A Sharp Drop in Deductions
Before the 2017 changes:
-
Sacramento County: 1 in 3 taxpayers deducted an average of $12,000.
-
El Dorado and Placer counties: 45% claimed around $16,500.
-
Yolo County: About a third deducted $15,300.
By 2022:
-
Only 13% claimed SALT deductions in Sacramento and Yolo.
-
Just 19–20% did so in El Dorado and Placer, according to the nonpartisan Tax Policy Center.
Senate Pushback
Raising the SALT cap remains uncertain. “There isn’t a high level of interest in doing anything on SALT,” said Senate Majority Leader John Thune, R-S.D.
If the cap stays at $10,000, the bill could lose key support. Republicans from high-tax states like California and New York have warned they won’t back the legislation without the higher SALT cap.
“If the Senate reduces the SALT number, I will vote no, and the bill will fail in the House,” warned Rep. Mike Lawler, R-N.Y.
Reps. Young Kim, R-Anaheim, and Andrew Garbarino, R-N.Y., co-chairs of the bipartisan SALT Caucus, reinforced that message:
“We have been crystal clear that the SALT deal we negotiated in good faith with the Speaker and the White House must remain in the final bill.”
The Senate is expected to vote next week on the revised “One Big, Beautiful Bill.” But without movement on the SALT deduction, the future of the bill remains uncertain.
