House Republicans Begin Tax Plan Debate: SALT Cap and Child Credit in Spotlight

House Republicans have officially launched debate over a sweeping tax package aligned with former President Donald Trump’s priorities, with key discussions centering on the state and local tax (SALT) deduction cap and expansion of the child tax credit.

The House Ways and Means Committee released its draft of the tax legislation on May 12, with debate beginning the following day. The proposed package, estimated to cost $3.7 trillion over 10 years, falls under the Republican-set $4.5 trillion ceiling, leaving room for potential adjustments before the committee vote.

The proposal includes several Trump-backed provisions, such as extending existing tax cuts, exempting tips and overtime pay from taxation, and adding a $4,000 deduction for older Americans. However, it omits other Trump priorities, including increasing tax rates for top earners and eliminating the carried interest loophole.

"Taxes" sign on dollar bills | Source: Pexels

Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, emphasized the fiscal constraints facing lawmakers. “It’s really important for any additional tax cuts to be paid for,” he said.

SALT Deduction Cap a Key Issue

One major focus is the cap on the SALT deduction. The $10,000 limit, enacted in the 2017 Tax Cuts and Jobs Act, is set to expire after 2025. The draft bill would raise the cap to $30,000 for most taxpayers, with a phaseout beginning at $400,000 in modified adjusted gross income. Some lawmakers are advocating for a higher cap, which may be feasible within the budgetary framework.

Calculator and pen on a paper sheet | Source: Pexels

Child Tax Credit Expansion Proposed

The bill also proposes increasing the child tax credit from $2,000 to $2,500 per child through 2028, with inflation adjustments for the refundable $1,400 portion. However, Chuck Marr of the Center on Budget and Policy Priorities noted the change “does nothing for the 17 million children who currently don’t get the full $2,000 child tax credit because their families’ incomes are too low.”