House tax plan would lower caps on 401(k)s, cut state and local deductions

— -- The details of the House Republican tax bill have continued to be intensely debated even over the last 24 hours and those involved in crafting the legislation are still scrambling to negotiate their tax overhaul ahead of tomorrow’s planned release.

The Ways and Means Committee is set to meet shortly to press through the final sticking points.

Republicans tell ABC News the biggest point of contention right now is the state and local tax deductions (SALT), with opposition coming from members of high-tax states like New York, New Jersey, California and Illinois.

The latest draft would eliminate the deduction for state and local income taxes. But it would retain the deduction for local property taxes.

Of all the sticking points “SALT is the only one with the potential to blow the bill up," N.J.Rep Tom MacArthur said, adding “there’s definitely progress.”

“We went from it being completely eliminated, to it not being completely eliminated,” MacArthur said. “It may not be enough yet, but I think the concept with continued improvement may be enough."

While the holdup for some is trying to keep the state income tax deductions, MacArthur’s concern is “what is a reasonable cap so that most Americans are able to deduct... their property tax.”

But that’s not going to be enough for New York Rep. Lee Zeldin. He says the elimination of all but the local property tax deduction might not be enough to convince him to back the bill.

"It's a geographic redistribution of wealth picking winners and losers and I wouldn't want to be supporting a deal that picks my home state as a loser," he said.

Another key area of compromise between House Republican leaders and the White House are 401 (k)s, according to two sources familiar with the draft bill.

The White House, as the president tweeted, wanted to keep the current annual maximum for tax-free contributions ($18,000); House Republicans wanted to lower the limit to $2,400. The bill, as of this morning, would lower what individuals may contribute tax-free to their 401(k)s, to an amount about halfway between the current limit and what House Republicans initially proposed.

The latest draft of the bill would retain the elimination of the estate tax. Although there had been intense internal debate as recently as Tuesday night about phasing it in — increasing the maximum amount exempt from the tax (currently $10.9 million for married couples) for the first five years and then eliminating it — sources said the latest draft would call for the elimination of the estate tax.

That said, the White House and House Republican leaders anticipate the Senate will not go along with getting rid of the estate tax and expect the proposed elimination will be negotiated away in conference.

Most Republicans who spoke with ABC News still have not seen any legislative text, but continue to expect the bill to be released tomorrow.

And they insist that passage by Thanksgiving is feasible.

“We can move quickly and I feel we’re on pace for that,” Rep Patrick McHenry, the chief deputy whip, said.

Rep. Mark Meadows, the chairman of the ultra-conservative House Freedom Caucus, added that without arbitrary deadlines there would be no movement towards a bill.

Treasury Secretary Steve Mnuchin and the president’s top economic adviser Gary Cohn, who met with Senate Republicans on the Hill Wednesday, are working the phones and have calls planned with some of the Republican holdouts for this evening, sources with knowledge of those efforts said.