That hasn’t stopped House Republicans from moving forward with their multi-trillion-dollar tax and spending package that hits all the necessary President Donald Trump sweet spots. This legislative action follows months of furious debate and negotiation within the GOP ranks. Implementation of the approved package will cost an estimated $2 to $3 trillion in the coming decade. This marks the beginning of a very big, new paradigm in the tax world.
The bill is almost a word-for-word copy of what Trump would want. It includes a proposal to remove the cap on the State and Local Tax (SALT) deduction. Currently set at $10,000, insiders suggest that the SALT cap could go below $40,000 in Senate negotiations. This decision will be critical in shaping how the legislation shapes up in the Senate.
A greater SALT cap goes into effect for tax returns filed in 2025. It will phase out for high earners over $500,000. Overall, this adjustment largely helps higher earners who have been more acutely impacted by the SALT deduction cap. What the bill ultimately means is still up in the air. This is because there has been yet no updated score from the Congressional Budget Office reflecting the last-minute hocus-pocus.
Senators are wasting no time making their policy preferences known as to the fate of the bill once it lands in the Senate. Some, like Josh Hawley, are advocating for more substantial tax breaks, while Vice President JD Vance has floated the idea of increasing the child tax credit, which could further impact family finances. Another potential bite is the alternative minimum tax, which would have the effect of further lowering benefits for some higher earners, making negotiation more difficult.
He urged that the debate in the Senate likely will be as contentious as the debate to come. He yelled “Shame!” when most of the people who opposed the bill stood up in opposition. This resistance will halt any progress in its tracks until the president’s serious about reducing spending and getting the deficit under control.
“We have enough to stop the process until the president gets serious about spending reduction and reducing the deficit,” – Sen. Ron Johnson
The clock is still ticking to finalize this large tax and spend bill. Lawmakers have an uphill battle ahead to bridge the gaps and find common ground before they are supposed to depart for recess around July 4th.
Alex Muresianu, a senior policy analyst at the Tax Foundation, has one. His view is that beginning negotiations with a high SALT limit, close to the current $10,000 SALT cap, makes the most sense politically and practically. He suggested that though there is some latitude to raise the limit, going as high as $40,000 doesn’t seem possible.
As senators continue gearing up for what is sure to be a fierce floor fight, advocates, experts, and analysts alike are watching the floor action with bated breath.
“That’s where the fight is really going to happen,” – Gleckman
This legislation is more than just a handful of immediate tax cuts. It will set the tone for economic policy and fiscal policy for decades to come.