Senate Republicans are staring down a collision course with the House as they weigh possible changes to the state and local tax (SALT) deduction cap as part of larger revisions to the party’s massive tax bill.
House Republicans hailing from high-tax blue states struck a deal with Speaker Mike Johnson (R-La.) to increase the SALT deduction cap to $40,000 from the current $10,000 mark shortly before the full chamber passed the “big, beautiful bill” early Thursday.
However, their work could be all for naught if the Senate GOP has its way: The conference has no members hailing from SALT states, and many side with President Trump on the issue despite the party’s need to keep them on board in an eventual final vote in the lower chamber.
“There’s not one Republican in the United States Senate who gives a s— about SALT,” said Sen. Kevin Cramer (R-N.D.). “Having said that, what does matter is 218 votes in the House, and we want to be cognizant about that.”
For much of the last month, the issue had been a vexing one for Johnson and House Republicans as the group of nearly a half-dozen SALT members held the keys, intent on reversing what they viewed as a wrong during the 2017 tax cut package.
The current cap was put in place then, but it was set to expire fully at the end of this year without action, giving the SALT members leverage. However, that power is limited to their chamber, as Senate Republicans seem hesitant to give what they view as a bailout for Democratic-led states.
“It comes down to costs. It’s probably going to get entangled [in the larger debate]. I hate the SALT policy,” Sen. Thom Tillis (R-N.C.) told reporters.
Tillis, a former Speaker of the House in Raleigh, noted, though, that he’s sympathetic to Johnson’s plight and recognizes that it probably has to remain in the bill in some form as it is debated in coming weeks.
Johnson appeared at the Senate’s weekly policy luncheon on Tuesday to deliver an update to the conference as the House hit the home stretch of its high-stakes negotiations. He spoke openly about the issue.
He ended up striking a deal with SALT members later that day, but was candid about the thorny nature of the talks.
“He described it as trying to walk across the Grand Canyon on dental floss,” said Senate Minority Whip John Barrasso (R-Wyo.).
Nevertheless, some members seem intent on putting the upper chamber’s imprint on the issue. Cramer told The Hill that he expects the current SALT cap deal to be potentially cut in half by the Senate into the neighborhood of $20,000 — a move that would certainly infuriate tri-state Republicans.
“I would expect — and certainly hope — that we would modify that very generous SALT cap to a more modest number that recognizes we need moderate Republican votes in the House to pass the final bill,” Cramer continued. “But maybe this is a little bit too far for most of our taxpayers to subsidize bad tax policy in other states.”
The proposed $40,000 cap would be for individuals making $500,000 or less in income. That deduction cap and income limit would increase 1 percent per year over the next decade. When the bill expires, the deduction and income limits would be $44,000 and $552,000.
Overall, Senate Republicans are expecting wide rewrites of much of the House’s bill, including in some parts to make it compliant with the Byrd Rule, that the upper chamber must abide by.
“I think there will be considerable changes in the Senate,” Sen. Ted Cruz (R-Texas) told reporters Thursday, pointing to a possible reprisal of what happened in the 2017 tax cut push. “The House passed a good bill. It came to the Senate, and we made it substantially better.”
The Senate Commerce Committee chairman added that he expects those changes to occur “across the board” in the package.
Senate GOP leaders will need to make revisions in part to keep as much of the caucus together as possible, with some already signaling that they are dissatisfied with the House’s product and their level of spending cuts, especially those on the right.
Whether SALT falls into that group remains a question. Senate Republicans also expect that Johnson will have a say in the matter as they try to hit the sweet spot on both sides of the Capitol to win the requisite levels of support.
“I think most folks in the Senate have said: let the House figure out what it takes to bring those folks on board, and then we’ll do our best to honor it,” said Sen. Mike Rounds (R-S.D.). “If they’re comfortable with it, I think that lends a lot of credibility to accepting theirs.”
“It’s all got to fit together like a puzzle,” he added.
