SALT Shakes Up House Republican Tax Package Discussions

By Laura Weiss, CQ-Roll Call (TNS)

House Republicans opposed to limits on deductions for state and local taxes are making their first stand in a move that could test their newfound power in the GOP conference.

Their push to force relief from the $10,000 “SALT” cap is shaping up as a major challenge to Republican leadership and underscores the political weight the issue carries in some of the country’s tightest swing districts.

There have been New York, New Jersey and California Republicans who’ve rebelled against the GOP-created SALT cap from its 2017 inception, but they secured needed leverage in a narrowly divided House this year to force their party to confront the issue.

“It’s very important that the middle-class families in the blue states recognize that the Republican Party actually is aware of the challenges that they have, and we are actually reconciling that and taking into account the fact that this very silly $10,000 arbitrary, capricious cap is a legacy thing,” Rep. Mike Garcia, R-Calif., said in an interview.

Garcia is among a group of House Republicans who say they’d vote against a package of leadership-backed tax bills unless some relief from the SALT cap is attached—even just a “pinch of SALT.” Several say no tax bill can get their support unless it allows more state and local tax deductions.

The Ways and Means Committee-approved tax package would temporarily boost the standard deduction, extend business tax breaks for research and buying equipment, incentivize investment in small businesses and roll back climate tax credits from Democrats’ 2022 tax law.

New York Rep. Andrew Garbarino, co-chair of the bipartisan SALT Caucus, said enough Republicans are opposed to passing the GOP tax package to block it unless leadership adds that pinch of SALT. Garcia estimated six to 10 GOP members would vote against it.

New York Reps. Mike Lawler and Nick LaLota each said in interviews they’ll vote against the package without SALT. Rep. Marc Molinaro, a Republican from upstate New York, said in an interview that he’s pressing for more SALT deductions in the bill while stopping short of explicitly pledging a “no” vote.

“As has been evidenced in this Congress, there’s strength in numbers and we have the numbers,” Lawler said.

Garbarino said aides for SALT Caucus members have been meeting with Ways and Means staff to discuss options including an amendment raising the SALT cap. The exact numbers are still in flux but the focus is on a two-year fix to align with other provisions of the 2017 tax law that sunset after 2025, Garbarino said.

Ways and Means leaders may not be willing to amend the package, however, as doing so could risk sinking it anyway given many Republicans’ opposition to bigger SALT deductions.

The largest group of House conservatives, the Republican Study Committee, proposed getting rid of the SALT deduction entirely in its latest budget, saying even the $10,000 allowance benefits the wealthy and subsidizes liberal states’ taxing and spending.

A source familiar with the Ways and Means meetings said discussing the bills with SALT-focused Republicans is one effort among others to talk the measure through with various GOP lawmakers.

Majority Leader Steve Scalise, R-La., said in a recent news conference that Republicans wanted to pass the tax package as soon as they could but it wouldn’t immediately be put on the floor given other time-sensitive priorities.

Passing the GOP tax legislation isn’t essential. It appears to have no path forward in the Democrat-controlled Senate.

Still, the tax bills are meant to tee up negotiations for a bipartisan tax package, and SALT backers want to set up a cap lift to be part of those talks. The push could also prove the SALT backers’ mettle with critical battles looming on the campaign trail and over the cap’s future.

2024 elections

Control of the House in the 2024 elections runs partly through districts where residents are hit by the $10,000 deduction limit.

Eight Republican members of the bipartisan SALT Caucus represent seats that are considered in play in the next election cycle, according to Inside Elections with Nathan L. Gonzales. Two Democrats in the group are on the list.

The most vulnerable Republicans in the group are Garcia, Lawler, New York Rep. Anthony D’Esposito and New Jersey Rep. Thomas H. Kean Jr., whose races are considered “toss-ups.”

Rep. George Santos, R-N.Y., is also in a toss-up district hit by the SALT cap, but isn’t in the caucus; fellow New York Republicans have broken ties with Santos amid a federal indictment and allegations he lied about his background.

SALT Caucus members said they’d live up to campaign promises to press for more tax deductions and wouldn’t relent given their voters’ position.

“This is essential to our constituents, it is helpful to our own political survival and we will continue to fight for it,” LaLota said.

Several also argued that their conference must recognize that blue state Republicans need to deliver on SALT, and that success is critical to the broader party.

Garcia said even a small show of good faith in the GOP tax package could make the difference for Republicans defending their majority.

“We can have these conversations when Jason Smith is the chairman of the Ways and Means Committee or we can try to have these conversations again in two years from now when he’s the ranking member of the Ways and Means Committee,” Garcia said.

To make their case, the Republicans are also framing SALT as a problem conservative colleagues should want to solve, saying it impacts the middle class in their districts where the cost of living is high and that their constituents are overburdened by local taxes.

“We believe in shrinking the size and scale and scope of government and reducing the burden of taxation on people who are overtaxed,” said Molinaro, whose district is rated “tilt Republican” for 2024. “Tax relief is not equitable tax relief until and unless it takes into account the cap.”

Caucus split

Not all SALT Caucus members are choosing to make a stand on the GOP tax package.

Reps. Nicole Malliotakis, R-N.Y., and Michelle Steel, R-Calif., both voted for the trio of bills in Ways and Means and rejected an amendment from Democrats to increase the SALT cap. They championed the standard deduction increase, which other blue state Republicans welcomed but said isn’t enough.

New Jersey Rep. Christopher H. Smith, who voted against the 2017 law due to the SALT cap, said he’s pressing to raise the limit in the latest GOP tax package but won’t vote against it for that reason. Smith said he’s focused on allowing the limit to disappear entirely after 2025, when it’s set to expire along with much of the 2017 law’s provisions affecting individuals.

But Republicans want to extend the tax cuts beyond 2025, and limiting SALT deductions brings in significant revenue to cover those costs. The issue could be a major hangup in that debate.

Ways and Means Chairman Jason Smith wants to work constructively toward something palatable on the SALT cap for after 2025 and doesn’t want the same defections that happened in 2017 to repeat themselves, according to an aide to the Missouri Republican. The aide added that he’s willing to discuss short-term options before 2025 that could find some consensus.

That willingness is a sign the SALT backers’ message is breaking through. Smith represents a rural, lower-income district in Missouri, a state with a relatively low state and local tax burden, according to a Tax Foundation analysis.

He’s previously slammed undoing the SALT cap as a giveaway for millionaires. But Smith said during the markup of the GOP tax package that lawmakers need to discuss the issue.

“I will say that this is something that we are working to try to address something that’s fair because we know that this is all changing,” Smith said, naming blue state Republicans he said frequently press him on the issue and gift him salt shakers as a reminder.

______