Senate Republicans Seek SALT Cap Reduction Sparking GOP Conflict

The House of Representatives passed a Budget Reconciliation Bill in 2025 that significantly increased the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for incomes up to $500,000, with gradual annual increases until 2033. However, Senate Republicans are pushing to reduce this cap, viewing the $40,000 figure as too high and costly, setting the stage for a GOP divide and potential delays in the bill's progress before the July 4 deadline. Senate leaders, including Majority Leader John Thune and Finance Committee Chairman Mike Crapo, suggest the cap will likely be lowered to around $30,000, a figure seen as a compromise by some senators like Thom Tillis. This move faces strong opposition from House Republicans representing high-tax states such as New York, New Jersey, and California, who warn that reducing the SALT cap could jeopardize the entire legislation. The bill also includes provisions affecting pass-through entities and business income taxes in New York City, potentially resulting in significant federal tax increases for high-income taxpayers and non-resident partners. The ongoing negotiations highlight the tension within the GOP between moderates seeking relief for taxpayers in high-tax states and conservatives concerned about the bill's fiscal impact.