How the SALT tax deduction helped stall Jim Jordan's speaker candidacy

An important ingredient in this week’s drama on Capitol Hill — churning just below more widespread national concerns such as government spending and aid to Israel — is a debate over the contentious issue of state and local tax (SALT) deductions.

The widely tracked rule gives individual filers credit for the state and local taxes they pay toward their federal tax returns. A 2017 Trump-era tax bill raised costs for many of these filers in blue states by capping the SALT deduction at $10,000.

The effort to reverse limits on the deduction has emerged as a significant piece of the ongoing GOP opposition to Rep. Jim Jordan as the Ohioan continues to struggle for the gavel.

Reps. Anthony D’Esposito, Andrew Garbarino, Nick LaLota, and Mike Lawler — all Republicans representing areas of New York — have voted against Jordan twice so far and have cited SALT as one of the key reasons for their hesitancy.

With a slim GOP majority, Jordan can only afford to lose four votes in total; he saw 22 Republicans oppose him in the latest round of voting over an array of issues.

In a new joint statement Thursday morning, three of the holdouts — LaLota, Garbarino, and D’Esposito — underlined their focus on the issue.

They said they "remain steadfast that the next Speaker of the House prioritize our neighbors' concerns," listing SALT relief as the first priority, and adding that they remain in communication with Jordan "in hopes of finding common ground."

Jordan has apparently tried to negotiate on SALT and used one of his allies — California Rep. Mike Garcia — to float the idea of doubling the cap to $20,000, according to Bloomberg Tax, but his efforts appear to be falling short so far.

In a separate statement to Yahoo Finance, Rep. Garbarino said discussions were ongoing but "there has been no offer made and no solutions reached. Mike Garcia has not participated in any meetings between the New York delegation and Jim Jordan. He does not speak for New York."

Likewise, LaLota denied Wednesday night the offer has formally been made but underlined he’d reject it either way.

"That’s a pittance," he told Bloomberg Television, saying that the cap should either be eliminated or raised significantly, pointing to his bill that would increase the limit to $60,000 per year for individuals. Lawler would go even further and raise the cap to $100,000 for individuals.

'We need a speaker who understands New York priorities'

The issue stretches back to the 2017 Trump-era tax bill, which cut an array of taxes but actually raised costs in this arena by capping the SALT deduction at $10,000.

It was presented as a means to save money but was widely seen as a punitive move by Republicans to hurt blue states like New York that have some of the highest local tax rates in the nation.

Six years later, this vocal contingent of GOP congressmen from New York are using the disarray in the House to highlight their concerns and potentially push for significant concessions in exchange for their support.

The SALT deduction cap of $10,000 per household is currently set to expire in 2025 but these congressmen have repeatedly pushed for action sooner.

In total, Congress’s SALT Caucus boasts over 30 members from both parties who want to restore the full SALT deduction, with members of both parties signing on from high-tax states like California, New York, and New Jersey.

What's unclear is whether Jordan’s support would ensure a changing of the rules around SALT in any year-end tax deal. The deduction has earned the enmity of budget hawks who note it costs the US Treasury billions; multiple studies have found that the benefits of a full SALT restoration would disproportionately go to the richest Americans.

There are also broad sections of the country that would see minimal to no benefits from a SALT restoration with lawmakers in those areas — Jordan’s Ohio is just one example — agnostic or hostile to bringing back the full deduction.

For now, these congressman seem intent to keep highlighting the issue. Through two ballots, three have even tried to make their point by casting their votes for someone who isn’t currently serving in Congress: former New York Representative Lee Zeldin.

As Rep. LaLota put it recently, Jordan hasn’t demonstrated sufficient support for SALT so far and he’d rather vote to Zeldin over someone "who doesn’t have the votes."

Ben Werschkul is Washington correspondent for Yahoo Finance.

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