Republicans who flipped or held districts in blue states are gearing up to flex newfound muscles in their party’s slim majority against a GOP-created limit on deducting state and local taxes, known as the “SALT” cap.
Flipping seats in high-tax states like New York, New Jersey and California was key to Republicans regaining control of the House on Jan. 3. But those victories now complicate hopes of taking up a signature issue: extending tax cuts for individuals and smaller businesses set to sunset after 2025 under the tax law enacted during the Trump administration in 2017.
House Republican leadership and tax writers on the Ways and Means Committee “need to realize … we are in the majority because of Republicans winning in New York, New Jersey and California and, by the way, we don’t like the cap on state and local tax deductions,” Rep. Andrew Garbarino said in an interview.
A New York Republican who pulled off a 22-point win in his GOP-leaning Long Island district in the midterm elections, Garbarino is a co-chair of the bipartisan SALT Caucus. He said he’s sharing his message — that an extension of the $10,000 SALT cap doesn’t have the votes to pass the House — with party leaders and the Republicans vying to be the next Ways and Means chairman.
Republicans will be able to lose a maximum of only four votes on the House floor in January in votes where no Democrats cross party lines.
The problem for GOP leaders is there are already more than that number of Republicans with constituents paying state and local taxes that are on average around triple the current federal deduction limit. For example, the nearly 17 percent of voters in Suffolk County, which represents the bulk of Garbarino’s constituents, who claimed limited SALT deductions in 2020 paid about $28,000 per household that year, according to the most recent IRS data available.
The GOP created the SALT cap in its 2017 overhaul of the tax code, in which rate cuts and a larger standard deduction were paired with limits on itemized deductions. Those changes end after 2025, along with lower individual income tax rates, a 20 percent deduction for owners of pass-through businesses and expanded child tax credits.
Contenders to lead Ways and Means have said extending those parts of the law would be a priority, and a proposal to do so backed by more than 120 House Republicans includes a permanent $10,000 SALT cap.
Many Republicans slammed Democrats who tried to leverage their own razor-thin House majority over the past two years for SALT cap relief. Critics in both parties have pointed to the fact that the benefits of raising or repealing the cap would largely flow to wealthier households, while proponents argue it unfairly impacts their constituents and hits middle-class taxpayers in areas where taxes and the cost of living are high.
While it’s unlikely the Democrat-controlled Senate and President Joe Biden would get on board with an early extension of Republicans’ tax law, resistance on SALT complicates GOP efforts ahead of the 2025 cliff.
Garbarino said while SALT proponents would like to get rid of the $10,000 limit before the end of 2025, he’s not sure that’s possible and would prefer to simply let the cap disappear than to extend it at a higher dollar amount as a compromise.
‘Clock is running out’
“The clock is running out,” Garbarino said. “To me, I’d like to see it go completely in three years. I think it would be better than doing any sort of extension with a lift or with an increase right now. So I think time is on our side.”
Given Republican resistance on SALT and a split Congress, Garbarino said he didn’t expect House leadership to “touch this with a 10-foot pole” next year and believed a legislative push on the 2025 tax cliff would likely be pushed until after the 2024 presidential election.
Some other SALT supporters weren’t prepared to draw a line but made clear the issue is a priority. Another Republican leader of the SALT Caucus, California Rep. Young Kim, said she supports extending tax cuts in the 2017 law, though she’ll have to assess any bill.
“I’m committed to making sure that I have a seat at the table — making sure that my voice is heard to ensure that any tax cuts actually cut tax for my constituents,” she said in an interview.
Kim said she plans to discuss SALT with Republican leader and fellow California Rep. Kevin McCarthy, and she noted the state’s delegation meets weekly. She pointed to average home listing prices topping $1 million in Orange County, which she represents, and costs adding up to make owning a home unrealistic for many people.
About 18 percent of Orange County households paying about $30,000, on average, in 2020 state and local taxes claimed limited SALT deductions that year, according to IRS data.
New Jersey Rep. Christopher H. Smith said he’ll keep working to reverse the SALT cap, though he added that the past two years of Democratic control were the “golden opportunity” to at least raise the deduction limit before it expires.
Smith was among at least nine Republicans to vote against the 2017 tax law because of SALT, a list that also includes New York Rep. Elise Stefanik, who was reelected to be House GOP conference chair in the new Congress.
Democrats in 2018 successfully ran on the SALT issue in wealthier suburban districts after the cap was imposed, and some Republicans used a similar playbook on the 2022 campaign trail. Even as the midterms fell short of a “red wave,” Republicans picked up and defended seats surrounding New York City, a SALT-heavy area where taxes and the cost of living are high.
Nick LaLota, an incoming freshman representing a different slice of Long Island’s Suffolk County, said it would be premature to draw a line but pledged to push for relief.
“Rest assured, when negotiating budgets and the tax code, voters can be confident that I will be a strong advocate for the restoration of our SALT deduction,” he said in an interview after his election.
LaLota said his goal is to scrap the SALT cap but suggested compromise with critics from red states who view the deductions as a subsidy for blue-state spending, such as spending controls for states like New York.
“Republicans like me should be ready to cooperate, compromise and give a concession or two,” he said.
Anthony D’Esposito, who flipped a Long Island seat, said in a post-election interview he’ll be working toward repeal of the SALT cap and at least making sure it doesn’t extend past 2025, describing the limit as devastating for many in his district.
D’Esposito’s Nassau County constituents who claimed the limited deduction in 2020 — roughly 19 percent of county households — paid about $33,000 in state and local taxes, on average.
While D’Esposito wouldn’t comment on whether he’d vote for a bill in the future based on SALT, he said he intends to deliver on promises to voters and plans to sit down with fellow New Yorkers in the new year to make their position clear.
“Repealing SALT or finding tax relief for people of my district is super important and a priority,” D’Esposito said.
Two Republicans won seats formerly held by Democrats who were among the most vocal SALT cap opponents. Tom Kean Jr. won in northern New Jersey, and George Santos flipped a Long Island and Queens-area seat. Before redistricting, both districts were among the top users of the SALT deduction.
Santos is now embroiled in controversy for admittedly lying about his background and résumé, and there are growing calls for an investigation — including from LaLota — and possible expulsion if he won’t resign. But given that most of Santos’ would-be constituents live in Nassau County, it seems clear any potential successor would be similarly disposed toward getting rid of the $10,000 SALT cap.
Meanwhile, at least two members of the SALT Caucus have been among names circulating for open seats on Ways and Means: Reps. Nicole Malliotakis of New York, who represents Staten Island and parts of Brooklyn, and Michelle Steel of California, another Orange County Republican.
By late November, proponents like Garbarino and Democratic backer Rep. Josh Gottheimer of New Jersey said they were already discussing SALT with newly elected Republicans.
Between those new allies and a thin majority allowing just five Republicans to derail their party’s plans next year, Garbarino was optimistic on SALT.
“It’s a strong position to be in,” he said.
Peter Cohn contributed to this report.