The fate of President Donald Trump’s tax legislation may rest on whether the GOP can find common ground on tax breaks for high earners in predominantly Democratic states – and the issue also could cost House Republicans their majority next year.
House Speaker Mike Johnson (R-Louisiana) and a band of moderate Republican rebels are at loggerheads over how to handle changes to the state and local tax deduction, often called SALT. That provision allows individuals or married couples to subtract the amount they paid in state taxes from their federal tax bill, but it’s been capped at $10,000 – well below what many taxpayers owe, especially in high-cost-of-living areas – since 2017.
Johnson on Thursday floated tripling the deduction to $30,000, among other proposals still under discussion.
“I think we can find the right number that’ll do it and satisfy all the various concerns,” the speaker said.
But four New York Republicans – Reps. Nick LaLota, Andrew R. Garbarino, Elise Stefanik and Michael Lawler – objected and accused Johnson and the tax-writing Ways and Means Committee of “unilaterally” imposing a cap “they already knew would fall short of earning our support.”
“Insulting,” LaLota told The Washington Post on Thursday evening. “A lowball offer that doesn’t reflect reality and a number that can’t get to 218 votes. We’ve had multiple meetings with leadership, the committee and their staffs and have been quite clear that $30,000 wouldn’t do it for our constituents.”
Even though it was his Tax Cuts and Jobs Act that limited the deduction, Trump made changing the cap one of a long list of campaign tax promises. All told, the tax plans he’s made could cost up to $11 trillion over the next decade if Congress enacts them all, according to nonpartisan estimates.
The moderate Republicans, all from blue states, are looking for a higher cap, too. They face opposition from roughly 30 fiscal hawks who demand that the tax bill reduce the deficit – not increase it. Johnson this week said the GOP will find “the equilibrium point” on SALT but cautioned it would be one that “no one will be totally delighted with.”
When Trump and GOP leaders initially adopted the cap in 2017, the goal was to bring down the cost of the package and politically punish Democratic-led states that benefited the most from the deduction. That whole law is set to expire at the end of 2025, and if Congress doesn’t extend it, nearly every filer will see their tax rates increase next year.
The cap on the SALT deduction, though, also will expire – which means some individuals and families in high-tax states such as New York, New Jersey and California would pay less in taxes even with a higher overall federal rate.
“We have the ultimate walkaway position,” LaLota said Thursday.
That dynamic has Johnson and GOP tax writers caught between political and financial math problems as they race to meet several looming deadlines.
With a three-seat margin in the House, Johnson can’t afford to lose the five Republicans – LaLota, Garbarino, Lawler and Reps. Tom Kean Jr. (New Jersey) and Young Kim (California) – who have unified to oppose a tax bill that does not significantly increase the SALT cap.
The GOP’s majority runs through those lawmakers’ swing districts in Democratic states. In 2017, Republicans had a 40-seat majority, giving leaders the leeway to ignore demands from similarly located members without political blowback.
“My party needs my vote in order to extend the tax cuts that didn’t get the votes from members in districts like mine eight years ago,” LaLota said. “So there can’t be the same cap there was eight years ago. That reality doesn’t exist. There’s a new reality.”
Republican SALT supporters, though, have been mum even with tax-writing colleagues on what they’re looking for, wary that if they move first in negotiations, they’ll end up with a paltry offer.
“Anything you have to haggle on, the guy who says the number first essentially communicates to the other side what is ultimately the ceiling of the negotiation,” LaLota said Thursday.
But that unwavering stance also risks the GOP conference turning against SALT supporters. Some of that sentiment is already brewing.
“The taxpayers of Tennessee shouldn’t have to bail out somebody in New York because of their bad decisions. They’ve got terrible tax laws up there,” Rep. Tim Burchett (R-Tennessee) told The Post.
Republicans who want to raise the cap say that at minimum, they want to eliminate the “marriage penalty” that limits single and married taxpayers’ SALT deductions to the same level on federal taxes. They also want an amount tens of thousands of dollars above the current cap.
The speaker set a Memorial Day deadline for the House to send Trump’s “big, beautiful bill” on taxes, immigration, energy and defense to the Senate, and it’s unclear whether the upper chamber will tackle SALT because no GOP senators come from deep blue states. Republicans plan to use the budget reconciliation process to pass the measure on a simple majority, allowing them to bypass a Democratic filibuster.
But if Johnson agrees to raise the deduction cap too much, he risks alienating fiscal hard-liners concerned about the cost of new tax cuts. The nonpartisan nonprofit organization Committee for a Responsible Federal Budget estimated that raising the cap on those deductions could add between $200 billion and $1.2 trillion to the national debt over 10 years, depending on how high it goes. Republicans are already struggling to cut $2 trillion in federal spending – a firm red line for some hard-liners – and would have to find more politically painful budget cuts for every dollar in new tax cuts.
Politically, the deduction is a hard sell for lawmakers from ruby-red states that don’t have state income taxes, such as Texas, Tennessee and Florida. Lawmakers from those states say raising the cap would be asking their constituents to pay some of the federal tax bill of residents of higher-tax states, a similar argument Republicans made in 2017 to rationalize capping the deduction in the first place.
“Middle-class in a district like mine is different than middle-class in Long Island, New York,” said House Majority Leader Steve Scalise (R-Louisiana), who is the only member of GOP leadership to have been involved in writing the first Trump tax law.
The median household income in his district was $5,000 lower than the national median in 2023, and nearly $50,000 less than the median in LaLota’s Long Island district, according to the Census Bureau.
“You want to help them, help take care of their middle-income families, while at the same time recognizing that you can’t bring the deduction back,” Scalise said. “The cost of it was massive. And overall, it’s the idea that 45 states are subsidizing five states that have very high taxes imposed by their leftist governor.”
But the GOP moderates view it differently. Earlier this year, Lawler made clear to GOP leaders and Trump in a February White House meeting that he would lose reelection if Congress did not raise the cap, according to people in the room. The issue is so front-of-mind for New Yorkers that both Democrats and Republicans campaigned last year on restoring the deduction if their party was in power.
Scalise recounted that the “same concerns” exist now as in 2017, and he remains optimistic that GOP leaders will be able to net enough votes to ultimately pass Trump’s legislative agenda.
He recalled a tense, expletive-laden meeting in 2017 during which two former lawmakers – Republican congressmen Peter T. King of New York and Frank A. LoBiondo of New Jersey – told leadership they would vote against the final package if it included a SALT cap, a pledge they stuck to. But leaders were able to peel off three other moderates to get the bill through.
This time around, Scalise has no such luxury when whipping votes.
“We’re working on increasing that deduction. That’s where the negotiations are,” he said. “[They’re] a vital part of our coalition.”
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