Blue-state Republicans are ready for battle. Their goal is to restore the state and local tax deductions, or SALT, that allow Americans in high-tax states and localities to deduct what they pay locally from the amount of taxes they owe the federal government. Conservatives are loath to let the federal government bail out high-tax blue states and need that revenue to pass President Donald Trump’s budget through the Senate’s reconciliation process.
But the Northeast Republicans aren’t budging — yet.
The reality of DC politics is you can always count on the moderates to cave.
Republicans first passed a $10,000 cap to SALT reductions in Trump 45’s 2017 tax cuts. The move was sold as a fair and cost-effective way of paying for them, but the cap immediately enraged blue-state Republicans, whose wealthier constituents (and donors) relied on SALT.
These congressmen saw the caps as an attack on them, and they weren’t entirely wrong. In the modern American party breakdown, the Republican moderates derive their power virtually entirely through their closeness to leadership. The liberal wing of the party’s frequent attacks on the president left them isolated. Why keep bailing out blue-state budget blowouts? Why give them a hand? Conservative Washington chuckled plenty when the caps first passed.
Since then, many of these Republicans have campaigned on the promise of lifting the SALT cap to reward their wealthiest voters (read: donors). One congressman floated a $100,000 cap, as if anyone paying six figures in state and local taxes needed a break.
Busting the SALT caps is their top priority. They see returning home without a win here as a threat to their political survival. “It is a hill I am willing to stake my entire congressional career on,” New York Republican Nick LaLota vowed.
“If I vote for a cap that I can’t sell at home, I might as well just pack up my office now,” warned his fellow New Yorker, Rep. Andrew Garbarino. He’s got a point, but so do the congressional conservatives working to cover the costs of making the president’s signature tax cuts permanent.
The reality of D.C. politics is you can always count on the moderates to cave. Their relationship to leadership is their lifeline, so sinking the president’s all-important budget isn’t in the cards. They are, however, fighting a lot harder than most expected on this — and that tenacity is sure to win them concessions.
A $100,000 cap is essentially off the table, because 1) carve-outs for people that wealthy run completely against the messaging of the middle-class tax cuts and general MAGA agenda, and 2) the strict rules of reconciliation make it too difficult to afford.
In the end, the moderates will likely get something — but not everything. Every vote counts, after all — from all sides of the GOP. And while they won’t have the stomach to actually tank the bill, when forced into a corner, even a moderate Republican will make trouble. One negotiations insider told the Beltway Brief that number will probably look like a $30,000 cap — enough to tell constituents you tripled their write-off without open intraparty war.
But don’t expect it to be the end of the battle. Look for the Northeast Republicans to switch seamlessly to fighting Medicaid cuts next. But more on that in another newsletter.
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