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Senate Republicans want to slash — or in some cases kill — the $40,000 state and local tax deduction cap that the House added to President Donald Trump’s megabill — but avoiding a protracted battle may require them to bend.
Senators are cutting deals on Trump’s campaign priorities as they craft their version of the massive tax and spending plan, delaying a foreign “revenge” tax and changing other divisive provisions the House passed. The so-called SALT deduction is one of the last sticking points: Sen. Chuck Grassley, R-Iowa, told Semafor that the details of how his chamber treats the issue might look blank in its first draft because of the lingering bicameral disagreement.
House Republicans say they won’t back off their position, which would quadruple the current limit on SALT deduction. The main problem for those House members? Some senators’ olive branch to the House reminds them of Michael Corleone’s infamous offer: Nothing.
“Zero is a good number” for a SALT cap, Sen. Rick Scott, R-Fla., told Semafor.
It’s an epic clash between the disparate wings of the Republican Party – all over a tax break that disproportionately aids wealthy people in blue states. On one side is a Senate GOP almost entirely representing lower-cost states that is tired of kowtowing to the House; on the other side is a handful of House members whose electoral wins gave Republicans the majority, and the ability to even write a party-line tax bill.
Several Senate Republicans said the chamber wouldn’t totally zero out the SALT deduction, but they are contemplating making a big cut to the House language. That could lead to a protracted disagreement between the two chambers — and stall Trump’s megabill well past the GOP’s self-imposed July 4 deadline.
“Unless there’s at least $40,000 of SALT in the bill, it can’t pass the House,” said Rep. Nick Lalota, R-N.Y. “Those who are thinking pragmatically understand that reality.”
“We all think it’s a rather unrealistic demand that the few members in the House are driving such a huge deficit creator,” shot back Sen. Ron Johnson, R-Wis.
LaLota flipped his vote Thursday on legislation clawing back federal spending on public media and foreign aid. Asked how leaders got him to “yes,” he replied that “PBS and NPR will live on … and I expect my constituents will be quite pleased when they get $40,000 worth of SALT.”
Several lawmakers are playing peacemaker between the chambers; Senate Majority Leader John Thune and Finance Chair Mike Crapo were expected to address the matter with Trump directly at a White House meeting on Thursday.
Sen. Markwayne Mullin, R-Okla., is negotiating directly with Rep. Mike Lawler, R-N.Y., one of the most hardline SALT Republicans. And House Ways and Means Chair Jason Smith told Semafor Thursday that he is urging Senate Republicans to proceed with caution.
“They know what’s necessary by what we passed out of the House,” Smith said. “SALT, it’s not an issue to them other than they want to have a bill on the president’s desk.”
“We passed a very reasonable compromise in the House, and I just tell the Senate to thread the needle lightly,” Smith added.
Know More
There are “at least five” House Republicans who see $40,000 as a dealbreaker, LaLota said, who included Lawler and Rep. Tom Kean of New Jersey in that camp. He added that they are “on a roadshow of sorts, making sure that folks … understand how resolved we are about $40,000 SALT.”
While some Senate conservatives would prefer to blow up the SALT cap completely, they will likely have to finesse the language to avoid steamrolling the House. The increase to the SALT cap is estimated to cost roughly $350 billion over 10 years, and slimming it down could satisfy fiscal hawks.
Senators are considering potentially imposing a more strict income cap on the deduction to wring more savings out of the bill.
“I’m certainly willing to try to pass a bill that the House is going to struggle with, but ultimately pass,” said Sen. John Cornyn, R-Texas.
Battleground-seat House Republicans, meanwhile, are so far out on a limb for SALT that backing down now could severely harm their election chances. Republicans from states like California, New York and New Jersey form the majority-making component of the House GOP.
“No Republican senator likes the SALT; raising the SALT cap. I don’t either,” House Speaker Mike Johnson said on the “Ruthless” podcast Thursday. “But I told [senators], ‘The reality is, our majority runs through states like California and New York.’”
Most GOP senators understand that dynamic — to a point. Republican senators are also tired of swallowing whatever can pass the House, a dynamic that has repeated itself on several recent must-pass pieces of legislation.
And conservatives vowed to pursue the most savings they can out of the bill. A House priority that almost no GOP senators support is a prime target.
“It’s an easy way to go in and grab money and cut the deficit, which: Don’t disagree. The problem we have is, we still got to get the votes over there,” Mullin told reporters.
Room for Disagreement
The general message from most Republicans is that blue-state House colleagues may have to climb down on SALT — at least a little. As Rep. Byron Donalds, R-Fla., put it: “Everybody’s having to accept stuff they don’t like in this bill.”
“I think it’s actually going to be cut down a lot over here [in the Senate] and we move on,” Donalds said. “For my SALT colleagues: What matters more, SALT or small business taxes going up?”
Burgess and Eleanor’s View
Republicans are closing in on a deal. But the last pieces are always the hardest, and the weird SALT dance has the potential to snarl things even more at the last minute — especially after Speaker Johnson labored to get some of the same pro-SALT members to codify spending cuts.
It’s hard to see the Senate passing something that doesn’t slim down the House’s SALT language. We’ve even heard they might put a lowball number in their legislation to throw a scare into the House.
But in the end we think they’ll back-channel a compromise. It doesn’t seem like anyone wants a lengthy bicameral conference that delays the bill even longer.
Notable
- The so-called revenge tax is likely to be delayed in the final bill.
- LaLota met with Senate leadership staff this week to discuss SALT, according to POLITICO.