House Speaker Mike Johnson has tentatively agreed with Republican lawmakers from high-tax states to raise the cap on state and local tax (SALT) deductions.

The proposed increase would raise the cap to $40,000, up from the current $30,000.

This cap would apply per household for taxpayers earning less than $500,000 annually.

This agreement is part of negotiations surrounding a larger legislative package.

The SALT deduction primarily benefits residents of high-cost-of-living areas, such as those in New York City and Los Angeles.

Republicans from high-tax states have emphasized the importance of addressing the SALT deduction, suggesting its potential impact on future elections.

However, some Republicans from lower-tax states are hesitant, expressing concerns that raising the cap could encourage high-tax policies in other states.

The agreement’s final approval remains uncertain, as it needs support from all Republican factions, including those with differing views on the matter.

The negotiations involve complex discussions on various issues, including taxes, Medicaid, and green energy subsidies.