Senate moves closer to “acceptance” on big red line for House GOP

Key Takeaways:

• Senate Republicans are nearing a deal to accept the House’s $40,000 SALT deduction cap.
• The Senate may lower the income threshold for phasing out the SALT deduction below the House’s $500,000 mark.
• A $300 billion revenue shortfall has emerged due to budget reconciliation rules.
• Senators are exploring ways to offset the deficit, including adjusting SNAP savings and Medicaid proposals.
• Internal debates over provisions like an AI moratorium are affecting the bill’s progress.

Senate Republicans are inching closer to accepting the House-passed $40,000 cap on the State and Local Tax (SALT) deduction, a significant step toward reconciling differences in their major legislative bill ahead of the July 4 deadline. The move comes as negotiators seek compromises on key issues to ensure the bill’s passage.

Negotiations on the SALT Deduction Cap

While an agreement hasn’t been fully reached, there’s growing “acceptance” of the SALT deduction cap among Senate Republicans. “I wouldn’t say an agreement, just an acceptance,” said Sen. Markwayne Mullin (R-Okla.). “It does it with the income threshold, but not the cap.” The House version phased out the deduction for incomes above $500,000, but the Senate’s compromise is likely to lower that threshold. “We want to get it where it’s palatable for both sides, but neither side is going to love it,” Mullin added, highlighting the challenging negotiations.

Budgetary Challenges After Parliamentarian’s Ruling

The path to passing the legislation became more complicated after the Senate parliamentarian ruled roughly $300 billion in revenue sources as ineligible under budget reconciliation rules. “So we’re grabbing everything we can to make sure we have the deficit cuts,” Mullin explained. The ruling has forced senators to find alternative ways to offset the deficit without those revenue sources.

Efforts to Offset the Deficit

To address the shortfall, senators are considering adjustments to the Supplemental Nutrition Assistance Program (SNAP) savings that were cut by the parliamentarian. Agriculture Chair John Bozeman (R-Ark.) shared his strategy with fellow senators on working these savings back into the bill. “John pretty much outlined how he thinks he’s going to be able to work that,” said Sen. Shelley Moore Capito (R-W.Va.), suggesting there could be a longer glide path for states.

Adjustments to Medicaid proposals are also on the table. Majority Leader John Thune (R-S.D.) indicated changes to the federal matching share (FMAP) for new Medicaid enrollees might not be included in the final bill. Sen. Rick Scott (R-Fla.) proposed grandfathering existing enrollees under the current 90% match while gradually reducing the FMAP for future enrollees. “There’s no way the federal government can pay for this,” Scott stated. “My proposal is real simple. No one gets kicked off.”

Internal GOP Debates

Internal disagreements are adding another layer of complexity to the legislative process. Sens. Marsha Blackburn (R-Tenn.) and Ted Cruz (R-Texas) engaged in a heated debate over an artificial intelligence (AI) moratorium provision, with Blackburn arguing for the protection of songwriters. Such debates underscore the challenges Senate Republicans face in uniting behind a cohesive bill.

Optimism Amid Challenges

Despite the obstacles, senators remain hopeful about passing the legislation. “Right now, the bill is held together with happy thoughts and spit,” remarked Sen. John Kennedy (R-La.). “I think we’ll eventually pass something; I just can’t tell you when. We’ve got a lot of stuff to work out, and the bill will be changed on the floor.”

Sen. Katie Britt (R-Ala.) expressed a similar sentiment after a recent meeting. “I would expect us to kind of pick up right where we left off and keep working through the issues that people do have,” she told Axios. The ongoing negotiations are expected to continue as senators strive to meet their self-imposed deadline.

Conclusion

As the July 4 deadline approaches, Senate Republicans are racing against time to reconcile key differences and overcome budgetary hurdles. Acceptance of the $40,000 SALT deduction cap represents significant progress, but substantial work remains. The coming days will be critical in determining whether the GOP can unify around a bill that addresses budget concerns and satisfies both chambers.