Congress Ponders a Valentine for Some High-Income Married Couples

The House is set to consider—and likely reject as soon as Wednesday—the smallest proposed change yet to the $10,000 cap on the state and local tax, or SALT, deduction. The bill from Rep. Mike Lawler (R., N.Y.) would double the cap for married couples to $20,000, only for tax year 2023 and only for those making less than $500,000.

Lawler’s $12 billion bill is aimed at the core political problem caused by the SALT cap, which Republicans created in the 2017 tax law.

The deduction limit frustrates high-income residents of key suburban districts in New York, New Jersey and California. Some of them got net tax cuts from the 2017 law as a whole and some didn’t, but that $10,000 cap—especially laid next to $20,000 or $30,000 property tax bills—is still quite politically salient.

The Republicans who represented those districts in 2017 couldn’t block the cap, which was designed to raise money from high-income households to pay for across-the-board tax rate cuts. And lawmakers of both parties who have held those swing seats since 2017 haven’t been able to get the rest of Congress to repeal or raise the $10,000 limit, which has been hitting harder in recent years because it isn’t pegged to inflation.

For many high-income people, the cap raises the net cost of living in New York as opposed to Texas and Florida, states without income taxes that rely more on sales taxes. New York lawmakers worry about wealthy residents leaving and eroding the state’s tax base.

As opposed to prior repeal efforts, Lawler’s bill takes a more focused approach by limiting the change to married couples making under $500,000. More than half the direct benefits would still go to couples making more than $250,000, according to the Tax Foundation, a group that favors a tax code with lower rates and fewer breaks.

New York Republicans insisted that SALT cap changes be attached to any tax bill and threatened to use their leverage in the narrowly divided House to force that outcome. But the House just passed a bipartisan tax bill without touching the SALT cap. GOP leaders instead set up separate consideration of Lawler’s bill, and he and other New York Republicans say they are pushing hard for their voters’ interests.

“I hope that there will be strong bipartisan support for the bill," said Rep. Nick LaLota (R., N.Y.) “Currently, our tax code penalizes married couples. They only get the individual deduction."

But House members may not even vote directly on the Lawler bill.

First, the House must consider a procedural vote to allow debate. Republicans, who have a 219-212 majority, may lose some of their own members on that step. Rep. Chip Roy (R., Texas) opposed the procedural measure in the House Rules Committee and indicated he may do so on the House floor.

“I don’t think we should be going down that road," he said. “It’s one of the features of what we tried to negotiate in 2017."

And Democrats, even those from high-tax states, are reluctant to cast a procedural vote with Republicans.

Rep. Jim Himes (D., Conn.) said he favored Lawler’s approach.

“You eliminate the cap, it becomes a pretty regressive thing, but it would help a lot of my constituents to go to $20,000," Himes said.

He said that for Democrats, however, certain procedural votes are sacrosanct and that it is up to Republicans to get the bill over that hurdle and onto the floor.

The SALT stalemate looks likely to continue until at least next year. After 2025, the $10,000 cap is scheduled to expire, along with much of the rest of the 2017 tax law. Whoever is sitting in those swing seats in the next Congress will be back again, pushing against the cap.

Lindsay Wise contributed to this article.

Write to Richard Rubin at richard.rubin@wsj.com