President Trump has finally begun to lose patience with the House of Representatives’ “SALT caucus.” We welcome this development and hope that other power brokers within the GOP will follow suit. There is compromise, and then there is extortion, and the recent behavior of some Republicans in Congress has begun to resemble the latter. In effect, advocates of a higher SALT deduction have hijacked the entire budget process in pursuit of a self-serving carve-out that has crowded out everything else under discussion. The leader of the SALT caucus, Mike Lawler, has threatened to sink the bill unless his demands are met — even though this would dramatically raise taxes on nearly all his constituents. President Trump and Speaker Mike Johnson ought to call his bluff.
Ideally, there would be no SALT deduction in the federal tax code. Because it creates a system in which some Americans pay more than others for the same federal government, SALT is unfair. Because it rewards the citizens of irresponsible states and punishes those in responsible jurisdictions, SALT is perverse. And, because it shields taxpayers in progressive areas from the consequences of their political preferences, SALT incentivizes profligacy, dysfunction, and free riding. Because, in practice, SALT is a national subsidy for the blue-state model, one can understand why the Democrats would favor its extension. But the Republicans? With his characteristic bluntness, President Trump said on Tuesday, “We don’t want to benefit Democrat governors.” And why would he? The Republican ideal of government is Florida, not New York. It would be preposterous if, come 2029, the main legislative achievement of the Republican federal trifecta had been to force Floridians to send cash to New Yorkers, and thereby to save the ailing Democrats from themselves. Without SALT, the voters of New York, New Jersey, California, and elsewhere would be on the hook for the taxes they had approved. With SALT, they will not only be inoculated against that pain; they will get to send the bill to everyone else.
The 2017 Tax Cuts and Jobs Act did not manage to completely abolish SALT. But, by capping the deduction at $10,000 and not adjusting the cap for inflation, it put the deduction on the path to irrelevance. Whatever happens, this year’s renewal legislation will significantly reverse that victory. Thus far, Speaker Johnson has offered an increased cap of between $30,000 and $40,000, and an income-cutoff-threshold of between $400,000 and $650,000. This offer represents an act of fiscal vandalism, and yet, astonishingly enough, instead of accepting it cap in hand, the SALT caucus has had the temerity to cast it as an “insult.” When, on Tuesday, President Trump remarked caustically that “any SALT to those states is never enough,” he was bang on the money.
Politics requires coalitions, and coalitions require accommodation. Given the GOP’s narrow majority in the House of Representatives, nixing SALT completely was never going to happen in this Congress. But what Mike Lawler and the other members of his caucus are asking for redefines the word “unreasonable.” Their most recent position was that the SALT cap must be expanded to $62,000 for single filers and $124,000 for joint filers — a proposal that, if adopted, would cost more than every other new idea in the bill put together. Naturally, politicians of good faith can debate which of the supplemental tax-relief measures that have been debated is the most important — or, for that matter, whether it is a good idea to expand the 2017 law rather than simply to renew it. But nobody can argue with a straight face that it makes sense to add one trillion dollars to the deficit over a decade to create a special subsidy for the rich residents of profligate blue states. There are good Republican tax ideas — full expensing, lowering rates across the board, expanding HSAs, the child tax credit — and there are bad Republican tax ideas — no taxes on tips, no taxes on overtime, special deductions for seniors — and then there is this. Absent the transient electoral politics of 2025, there is nobody in America of sound mind who would suggest that the Treasury funnel the lion’s share of a trillion dollars to a bunch of very well-off families in New York, New Jersey, and California simply because those states cannot responsibly run their affairs.
Mike Lawler and his confederates have less leverage than they might imagine. In April, Lawler declared that “if we do not pass a tax bill, it will be the single largest tax increase in American history and democrats are planning to vote against it.” Well, also planning to “vote against it,” apparently, are Mike Lawler and his merry band. Do they believe that the outcome of such a vote — namely, “the largest tax increase in American history” — will be politically sustainable? Certainly, many of Lawler’s constituents share his desire for an expansion of SALT. But this desire is relative to the status quo, not to the status quo ante. If, as Lawler and his caucus have threatened, the Republicans’ “big, beautiful bill” goes down in flames, the result will not be the delivery of all his heart’s desires but the reintroduction of the pre-2017 tax code, with its higher rates and broader alternative minimum tax — which, for most of his constituents, would deliver a tax hike. Even in our topsy-turvy political climate, it is difficult to see how this eventuality would help Lawler and his colleagues to keep their seats.
As the only nationally elected figure in the mix, Donald Trump can play a useful mediating role. It is true that the tight congressional math requires the majority in the House to comprehend the predicament in which a handful of blue-state Republicans find themselves. But this does not imply that that handful ought to be granted carte blanche over the party’s entire agenda. At present, the SALT caucus is attempting to completely subordinate the nation’s tax system to the interests of a few of their richest constituents. This cannot stand, and, by drawing a line, President Trump can make sure that it does not.