The SALT Cap Compromise: Malliotakis’s $30,000 Proposal and Its Investment Implications

The debate over the federal SALT (State and Local Tax) deduction cap has reached a critical juncture, with Staten Island Congresswoman Nicole Malliotakis emerging as a pivotal player in shaping its future. Her conditional support for raising the cap to $30,000—a middle-ground proposal amid partisan and intra-GOP divisions—carries profound implications for investors in high-tax states.

The Legislative Landscape: A $30,000 Compromise in a Fractured GOP

Malliotakis, the only New York Republican on the House Ways and Means Committee, argues that a $30,000 SALT deduction cap would provide “much-needed relief for middle-class families,” covering 98% of households in her Staten Island district. Her stance contrasts sharply with demands from fellow New York and California representatives, who seek caps of $100,000 or higher, or outright elimination of the limit. These internal GOP divisions threaten to derail broader fiscal negotiations, including defense funding and tax cuts tied to President Trump’s “big, beautiful bill.”

The fiscal stakes are enormous. The Tax Foundation estimates that maintaining the current $10,000 cap’s expiration (set for December 2025) would add over $1 trillion to the federal deficit over a decade. Raising it to $30,000 would add another $200 billion, while proposals like Rep. Mike Lawler’s $200,000 cap could cost nearly $1 trillion more by 2035. To offset costs, Malliotakis has proposed an income cap restricting SALT deductions to households earning under $400,000–$500,000 annually—a move her wealthier-district colleagues reject as punitive.

Investor Implications: Geographies and Tax Brackets Matter

The $30,000 compromise would disproportionately benefit upper-middle-income households in high-tax states. For example, a married couple in New York earning $250,000 annually and paying $30,000 in state/local taxes would save up to $12,000 in federal taxes (assuming a 22% marginal rate) under Malliotakis’s plan. However, wealthier taxpayers—those earning over $430,000—would capture nearly 75% of the benefits if the cap were fully repealed, according to Tax Policy Center data.

Investors in real estate and pass-through entities (e.g., LLCs) are particularly sensitive to SALT changes. States like California and New York, which account for 40 of the top 50 congressional districts affected by the cap, have relied on pass-through entity tax (PTET) workarounds to bypass the $10,000 limit. Yet many PTET provisions expire in 2025, and Congress may target these loopholes to offset SALT relief costs.

Risks and Uncertainties: AMT Traps and Legislative Gridlock

Even if the cap is raised, the Alternative Minimum Tax (AMT) remains a hurdle. The AMT disallows SALT deductions, and its exemption amounts are projected to drop to ~$110,400 for married filers by 2026. This could trap high-income investors in the AMT, negating SALT savings.

Furthermore, legislative deadlines loom large. House Speaker Mike Johnson has set a July 4, 2025, deadline to avoid automatic tax hikes. With GOP leadership seeking a “balanced equilibrium” and Democrats opposing any cap extension, investors face uncertainty about whether the $30,000 compromise will pass—or whether gridlock could force a return to unlimited deductions in 2026.

Conclusion: Navigating the Uncertain Tax Horizon

Malliotakis’s $30,000 proposal represents a pragmatic approach to a politically charged issue, but its success hinges on fiscal trade-offs and partisan compromise. For investors, the stakes are clear:

• High-tax state real estate: A $30,000 cap could reduce the tax drag on property-wealthy households, potentially boosting demand in markets like New York and California.
• Pass-through entities: Investors using PTET workarounds must act swiftly, as these programs may sunset in 2025 or face federal crackdowns.
• AMT mitigation: Households near AMT thresholds should consider income-shifting strategies or charitable contributions to preserve deductions.

The final SALT cap level—and any accompanying income restrictions—will shape both federal budgets and investment strategies in high-tax states for years to come. As Congress races toward deadlines, investors must stay vigilant: the interplay of legislative action and fiscal reality will define winners and losers in this critical tax reform battle.

The path forward remains uncertain, but one thing is clear: the SALT deduction’s future is a litmus test for how lawmakers balance constituent needs, fiscal discipline, and partisan priorities—a balancing act with profound implications for investors.