As Congress weighs how to extend key elements of the Tax Cuts and Jobs Act (TCJA), lawmakers face difficult decisions about how to pay for the most economically impactful provisions without adding to the deficit, an outcome that the country cannot afford. One promising approach is capping the state and local tax (SALT) deduction for corporations — known as C‑SALT. While C‑SALT alone would raise corporate tax burdens and slightly reduce economic output, using it to offset the cost of extending pro-growth TCJA policies like bonus expensing and R&D deductions could result in net economic gains.
A new policy brief from Arnold Ventures fellow Scott Hodge shows that applying the existing $10,000 SALT cap to corporations would help level the playing field across business types, reduce distortions in the tax code, and raise over $430 billion in revenue over 10 years. This revenue could then be used to offset the cost of extending some of TCJA’s most pro-growth provisions, like full expensing and the deduction for research and development.
Capping C‑SALT also eliminates the need for complex state-level workarounds that have emerged since TCJA’s passage. These workarounds have created confusion and inequity between pass-throughs and traditional corporations, and between business owners and their employees.
“Capping C‑SALT is a worthy tradeoff for extending policies that boost GDP, increase capital investment, create jobs, and boost wages,” writes Hodge.
With gross federal debt surpassing 123% of GDP, Congress must prioritize smart, efficient reforms. Capping C‑SALT is one of 20 responsible policy ideas Arnold Ventures has identified to help Congress extend TCJA’s most effective provisions while safeguarding America’s long-term fiscal health.
To learn more, click the resources below:
- Tax Foundation: Making the Tax Cuts and Jobs Act Permanent: Economic, Revenue, and Distributional Effects
- Tax Foundation: Growth Should Be a Key Consideration if Corporate SALT Is Limited
- Bipartisan Policy Center: Paying the 2025 Tax Bill: SALT Deductions
