The House Ways and Means Committee is looking at limiting corporate state and local tax deductions as one way to offset the costs of a large party-line tax bill, according to two people familiar with the discussions.
The panel, which oversees all tax policy, is considering the limit among other potential offsets for the bill, according to the people, who were granted anonymity to share private deliberations. Companies currently can deduct an unlimited amount of state income, property and sales taxes from their federal tax bill.
The discussions signal that a proposal to limit corporate SALT, as the deduction is called, may have enough support among Republicans to make it into a party-line tax bill. The far-right House Freedom Caucus had previously raised the idea of putting a cap on the deduction to pay for raising the current cap on the amount of state and local taxes that individuals can deduct, but it was unclear how much buy-in the proposal had with the rest of the conference.
The discussions come as tax writers scramble to find ways to contain and offset the costs of both extending expiring tax cuts and enacting President Donald Trump’s tax priorities. House Republicans adopted a budget plan last week that set the upper limit on the size of tax cuts at $4.5 trillion, which leaves very little wiggle room for the conference to enact all of their ideas.
Extending the expiring provisions of Trump’s 2017 tax cuts for ten years would cost roughly $4 trillion without interest, according to the Congressional Budget Office. Republicans have also committed to restoring business write-offs like bonus depreciation, which would cost $378 billion over a ten-year window, according to CBO.
Those policies alone would leave little room for some of Trump’s campaign promises to eliminate income taxes on tips and overtime work, which could add hundreds of billions more in red ink.
The Ways and Means Committee has also been considering other ways to cut down the impact of a tax bill on the federal deficit. Those include strengthening work requirements for the Temporary Assistance for Needy Families program and repealing a nursing home staffing mandate implemented under the Biden administration.
According to a joint analysis by the Bipartisan Policy Center and the Tax Foundation, repealing corporate deductions for state income taxes could raise around $192 billion in revenue.
