Senate Republicans don’t exactly know what they want the state and local tax deduction cap to be in the reconciliation bill. They just know they don’t like the House’s number.
“There seems to be a growing confidence that whatever number we come up with will be different,” Sen. Kevin Cramer said Wednesday.
Cramer added that senators were still “working out the details” on the state and local tax deduction, which is colloquially known as “SALT” and allows taxpayers to write off their state and local taxes on their federal bill. But as of Wednesday, he said “it sounds like there’s some certainty that our number will be less than House’s.”
It’s a critical divide, with just days to spare before the GOP’s self-imposed July 4 deadline for a reconciliation bill to reach President Donald Trump’s desk. The House-passed version of the bill included a $40,000 SALT cap, which was carefully negotiated and meant to appease Republicans from states with high property taxes, like New York, New Jersey and California.
Senate Republicans, who represent none of those states, countered with a $10,000 cap — the same current cap that the blue-state House Republicans argue is harming their constituents.
Predictably, House Republicans weren’t about to accept a $10,000 cap. They swore that increasing the cap was crucial to their reelection campaigns in their vulnerable districts, and they said they would vote “no” on reconciliation if the SALT cap wasn’t adjusted.
Senate Republicans seemed to understand that — the $10,000 appeared to be more of a negotiating position than a firm position — but what Senate Republicans haven’t so easily accepted is the stance that House Republicans from these blue states have adopted: They won’t accept a dollar less than the House bill.
These Republicans, known on Capitol Hill as “the SALT Caucus,” say the $40,000 cap isn’t a negotiating position; it’s their final position. And given their hard-line stance, senators are at a bit of an impasse.
Senate GOP leaders insist they will vote this week on the reconciliation bill, potentially as soon as Friday. But without a solution on SALT, the whole bill is getting held up.
Senators don’t want to vote on a bill they know can’t pass the House. That would just mean opening up the legislation to more changes in the House and another vote in the Senate. But given the stubbornness of these House Republicans, Senate Republicans aren’t feeling particularly charitable on SALT.
Senators themselves have a wide array of feelings about the SALT deduction.
Sen. John Cornyn of Texas said his preferred SALT deduction would be “zero.”
“Well, maybe not zero,” Cornyn said, continuing that he could “maybe” live with the current $10,000 cap.
“The speaker is going to need some flexibility in order to get the thing passed,” Cornyn added.
Cornyn may understand that red-state Republicans may have to give a little to get blue-state Republicans, even on a tax deduction that overwhelmingly benefits the richest 1% and functionally incentivises states to have high taxes. But other GOP senators were less understanding.
When NOTUS asked Sen. Rick Scott of Florida what his preferred SALT cap would be, he also said zero, only there was no further addendum like Cornyn.
Cramer wasn’t necessarily set on a number, but he said he liked $20,000 “because it’s double what it currently is, and it’s half of what they wanted.”
One potential solution would be to negotiate on the income cap for the SALT deduction. Under the House bill, the deduction phases out for taxpayers earning more than $500,000. House lawmakers may be open to a lower income phaseout, but they don’t appear open to negotiating on that overall $40,000 SALT cap.
Throughout the Senate, Republicans are wondering whether they actually need to buy off this small group of House Republicans, particularly when their demands are so expensive. According to the Tax Foundation, quadrupling the SALT cap would cost about $320 billion over the next decade.
Still, it’s clear to some senators that the House’s SALT caucus isn’t budging, and a $40,000 cap may just be the cost of getting the reconciliation bill over the line.
For instance, Sen. Mike Rounds was deferential to the House’s concerns.
“We had told the House originally that that was their problem to work out. They worked it out,” Rounds told NOTUS. “So I’m inclined to listen to the concerns that a number of my fellow senators have had, but the bottom line is that was a very sensitive issue for the House, and I’m going to lean towards respecting their concerns.”
House Speaker Mike Johnson has warned Republicans to tread carefully on SALT. It took House GOP leaders weeks to find a compromise between raising the SALT cap and balancing the cost of the bill, which conservative critics already say is too high. Senate Republicans, however, don’t seem to be listening — on SALT, or the bill writ large.
Sen. Markwayne Mullin has been acting as a liaison on SALT talks between the House and Senate. On Monday he said the Senate “wants to go further to the right, and the SALT Caucus goes further to the left, we’re going to find, I think, hopefully, some place right in the middle that both sides can live with.”
When Mullin was asked whether there was a chance of keeping the $40,000 cap with an adjusted income threshold, he said he didn’t want to talk about details, “but there’s a possibility.”
But if Mullin’s colleagues are any indication, the appetite isn’t necessarily there. While some people are more open to deferring to the House’s preferred number, not all are. Only three senators can vote against the bill before it’d fail altogether. And those numbers are about the same in the House, depending on absences.
Senate Majority Leader John Thune is still gunning for a Friday vote, though that timeline may be slipping.
When he was asked Wednesday about a Friday vote, Thune was noncommittal.
“We’ll see,” he said.
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Ursula Perano is a reporter at NOTUS. Shifra Dayak, who is a NOTUS reporter and an Allbritton Journalism Institute fellow, contributed to this report.