The impasse over the state and local tax (SALT) deduction cap is deepening as Senate Republicans and House moderates from high-tax blue states remain at a loggerheads, a stalled state-of-play that is threatening to thwart leadership’s goal of enacting the party’s “big, beautiful bill” by July 4.
Sen. Markwayne Mullin (R-Okla.) — a former House member and key liaison between Republicans in both chambers — spoke with a group of House GOP lawmakers in the SALT Caucus on Wednesday to discuss the issue, two sources familiar with the matter told The Hill, as top lawmakers hunt for a consensus on the cross-Capitol debate. Reps. Mike Lawler (R-N.Y.), Andrew Garbarino (R-N.Y.), Young Kim (R-Calif.) and Tom Kean Jr. (R-N.J.) were present, according to one of the sources.
Leaders are trying to bridge the gap between the House’s $40,000 SALT deduction cap for individuals making $500,000 or less and the Senate’s proposal for a $10,000 cap, which matches the number in current law. SALT Caucus members have deemed the Senate’s offer a nonstarter and are demanding that the House deal — which was the product of months-long negotiations with Speaker Mike Johnson (R-La.) — remains in the final product.
After Wednesday’s call, progress appeared elusive.
“We’re still working on a deal. We’re still running numbers on things. … A little premature, and I hope [the leaks] didn’t damage us moving forward,” Mullin told The Hill on Thursday. “We’re not there. … We’re in a good spot. We’re not in a final spot.”
The leak Mullin referred to was a report from Punchbowl News that the senator and SALT Caucus Republicans discussed keeping the $40,000 deduction cap in place but decreasing the income threshold from $500,000 — which would still allow filers a larger SALT deduction but limit it for higher-income earners, bringing down the price tag for the provision.
Key SALT Caucus Republicans, however, are rejecting that idea, showing zero appetite for tampering with the deal they landed last month.
“The bottom line here is the Senate has a position of $10,000 — we’re not accepting that,” Lawler told The Hill on Thursday. “That’s the reality. Never gonna vote for that bill.”
Asked if he was open to negotiating to bring down the $500,000 income cap, Lawler responded: “No, look, we negotiated our deal, this is the deal.”
“They need to just accept that this is the deal,” he added. “This is the deal that we negotiated, and they should abide by it.”
Rep. Nick LaLota (R-N.Y.), another vocal member of the SALT Caucus, sounded a similar note, telling The Hill that the compromise the group closed in June “shouldn’t be touched.”
“It earned the votes of Republicans with very different world views and to change it is to risk losing votes and tanking the whole bill,” he added.
The New York Republican shut down any chance of changing the $500,000 income cap: “I am done negotiating,” he said when pressed on if it was open to discussion.
Senate Majority Leader John Thune (R-S.D.), to be sure, has said that the $10,000 cap in the Finance Committee’s part of the megabill is a “marker” for negotiations going forward, noting that the House and Senate will “figure out a landing spot.”
But moderate Republicans from high-tax blue states — including New York, New Jersey and California — are showing no interest in more talks and instead want the Senate to stick with their deal. The group is warning that they will vote against a bill that contains a $10,000 deduction cap — enough opposition to sink the entire package full of President Trump’s legislative priorities.
“Restoring SALT is not about New Jersey alone. It is about fixing a flaw in the federal tax code that stifles growth, undermines local control, and violates the conservative belief in fair, limited taxation. $40k is the right compromise,” Kean Jr. wrote on X this week in response to the Senate’s proposal. “No SALT, no deal.”
The current dynamics do not come as a surprise. House Republicans in the SALT Caucus for years have pushed to increase the $10,000 deduction cap in current law, decrying the 2017 Tax Cuts and Jobs Act for implementing the limit in the first place. They saw deliberations over the “big, beautiful bill” as their time to deliver for their constituents, and negotiated the $40,000 deduction cap for individuals making $500,000 or less.
But with no Senate Republicans from high-tax blue states, SALT does not have a champion in the upper chamber — and Senate Republicans, as a result, are trying to change the costly provision.
“There’s not one Republican in the United States Senate who gives a s— about SALT,” a former House member, said last month. “Having said that, what does matter is 218 votes in the House, and we want to be cognizant about that.”
The deadlock, however, is dragging on into dangerous territory for Republican leaders on Capitol Hill: Top lawmakers are under heavy pressure to enact the “big, beautiful bill” by July 4, a deadline the administration has gotten behind. White House chief of staff Susie Wiles told Senate Republicans during their weekly lunch this week that the president wants the megabill on his desk by Independence Day.
Despite that due date, SALT Republicans are showing no signs of relenting on their demand for the House deal. In fact, the calendar is on their side: If the 2017 Trump tax cuts expire without a deal on SALT, the deduction cap snaps back to being unlimited — a reality they would be elated with.
“The Senate’s choice is simple,” LaLota said. “[A]dopt the House’s $40,000 SALT compromise—or risk blowing up the [One Big, Beautiful Bill Act], letting SALT go back to unlimited, and watching the Trump tax cuts expire.”
Lawler echoed that sentiment, arguing that the House deal is the only agreement that will land the SALT Caucus’s support.
“By agreeing to a cap we are providing our colleagues the ability to pay for other provisions including the doubling of the standard deduction, the no tax on tips, no tax on overtime, the enhanced child tax credit. So this is the deal,” he said. “This is what was agreed upon.”
Al Weaver contributed.
