State and local tax deductions on federal income tax forms would remain capped at $10,000 under a plan released Monday by the Republican-led Senate Finance Committee — a limit with significant implications for California taxpayers.

The House last month voted to raise the deduction cap to $40,000 for qualifying taxpayers, generally those with taxable incomes under $500,000.

But many senators have been hesitant to follow suit. The $10,000 limit, known as the SALT cap, was introduced in the 2017 Republican-authored tax overhaul. Before then, there was no cap.

The change has had a major impact on taxpayers in California and other high-tax states, which tend to lean Democratic.

“The tax code never should have contained a cap on the SALT deduction in the first place. Suggesting we keep the current cap is an insult to Californians,” said Rep. Mike Thompson, D-St. Helena.

“Maintaining the current cap would unfairly punish California and other states like ours,” added Thompson, the top Democrat on the House Ways and Means tax policy subcommittee.

Before the 2017 tax changes, about one-third of taxpayers In Sacramento County deducted an average of $12,000 for the state and local taxes they paid. With the $10,000 cap in place, and the standard deduction increased, those who got the state and local tax break dropped to 13% in 2022.

In El Dorado and Placer counties, 45% of taxpayers previously claimed an average of roughly $16,500 in SALT deductions. In 2022, only 19% to 20% did, according to the nonpartisan Tax Policy Center.

In Yolo County, about one-third of taxpayers had deducted an average of $15,300 under the previous law. That fell to 13% by 2022.

A reluctant Senate

The SALT figure in the Senate plan remains subject to negotiation, though raising it could be difficult.

“There isn’t a high level of interest in doing anything on SALT,” Senate Majority Leader John Thune, R-S.D., told “Fox News Sunday.”

If the cap remains unchanged, the bill could lose support from Republicans in high-tax states like New York and California. GOP leaders argue that the broader bill still provides tax relief for most Americans.

The Senate is making several revisions to the sprawling One Big, Beautiful Bill, with a vote expected next week. If approved, it would return to the House, which narrowly passed it last month.

But a lower SALT cap could jeopardize its chances.

“If the Senate reduces the SALT number, I will vote no, and the bill will fail in the House,” said Rep. Mike Lawler, R-N.Y., a leading proponent of the higher deduction.

Reps. Young Kim, R-Anaheim, and Andrew Garbarino, R-N.Y., co-chairs of the SALT caucus, echoed that stance.

“We have been crystal clear that the SALT deal we negotiated in good faith with the speaker and the White House must remain in the final bill,” they said in a statement.