We don’t know exactly what the Senate’s reconciliation bill will look like.
But what we do know is that Senate Republicans are looking to rewrite two of the hardest-fought provisions in the House’s bill.
Senate Finance Committee Chair Mike Crapo (R-Idaho) told GOP senators Wednesday that he plans to scale back the House’s SALT cap deal and rework repeals of clean energy tax credits from the Inflation Reduction Act.
The changes could put Speaker Mike Johnson in a perilous position in his quest to get the reconciliation bill done by July 4. Here’s why:
1) Two New York Republicans have said they won’t vote for a dollar less than the House’s $40,000 cap on deducting state-and-local taxes. There are a handful of other SALT Caucus Republicans who’ve warned the Senate against changes and view the negotiations as settled.
The SALT backers are expecting Johnson to sell the cap to the Senate and make sure it sticks. If it doesn’t, expect some furious blue-state lawmakers.
Aware of the potential pitfalls in changing SALT, Sen. Markwayne Mullin (R-Okla.) said he’s been talking with blue-state House Republicans about it “almost every day.” Mullin, who often acts as a liaison with the House, said it’s his “number one issue” right now.
2) Crapo told senators that Finance’s plan for IRA credits involves accelerating some repeals and allowing gentler phase-outs for others based on energy type. The IRA cuts could get close to the more than $500 billion that the House included, but may tally somewhat lower.
The House Freedom Caucus has been pressing senators to hold the line on the House version. The details of the Senate’s plan will matter a lot. Remember: House Republicans like Rep. Chip Roy (R-Texas) want nothing short of gutting the IRA to its core.
Over a dozen House GOP moderates are tracking the IRA changes closely, too. The House had to walk a tightrope on the IRA cuts, and now the Senate is as well.
Senate strategy: Senate Majority Leader John Thune is trying to be cautious of the House’s needs, but he can only do so much.
The Senate’s vote-counting math is simply different than the House’s. GOP senators are totally dug-in against the House bill’s SALT cap. They see it as a small minority of lawmakers in one chamber forcing them to accept a policy they dislike — and that costs more than $350 billion compared to extending the current cap.
Thune is juggling different IRA demands, including at least four senators who want a less aggressive approach to repeals.
There’s also the money factor. The Senate Finance Committee is planning to make key business tax breaks for R&D spending, interest expenses and buying machinery and equipment permanent in their rewrite of the House-passed package. This is a top priority for many Finance Committee Republicans.
Permanence balloons the tax bill’s cost, so GOP senators have to find savings elsewhere, such as with SALT. Senate Republicans also want to dial back some of President Donald Trump’s tax priorities in order to reduce the overall cost.
Finance is still working on finalizing the bill text. To that end, Crapo and Thune are heading to the White House today to meet with Trump. Senate Republicans are tentatively planning a conference meeting Monday to discuss reconciliation plans and tax details.
