Republicans are split over raising the SALT (State and Local Tax) deduction cap as part of their new tax bill.
Morning Brief host Madison Mills explains why the $10,000 cap is a key issue for lawmakers from high-tax states.
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What is the SALT deduction cap, and why is it such a sticking point for the Republican Party in its tax bill? To understand why GOP lawmakers are clashing over the cap, let's take a step back and look at what the SALT deduction is. SALT stands for state and local taxes. When people pay taxes to their city or state, they can subtract those payments from their federal taxes. This is called a tax deduction. It lowers the amount of income the federal government can tax you on. But in 2017, the Tax Cuts and Jobs Act capped the SALT deduction at $10,000 per household. Prior to that, there was no limit on how much you could deduct. And this change hit hard for people in high-tax states like New York or California, and for homeowners who also pay high property taxes. They couldn't deduct as much, which meant they owed more in federal taxes. The 2017 SALT cap is set to expire this year unless Congress takes action. And that brings us to the Republican tax bill. Speaker Mike Johnson says Republicans came to an agreement with holdouts from higher-tax states to raise the cap to $40,000. The agreement comes just one day after the president urging House Republicans to pass the tax bill in a visit over to Capitol Hill.