It’s the end of a hugely important week in Hill Republicans’ quest to craft a massive reconciliation package. Next week, a trio of House panels will mark up the most important pieces of President Donald Trump’s domestic agenda — cuts to social safety net programs and an extension of the 2017 Trump tax cuts.
But here’s what’s striking to us: So much about this reconciliation package is still undecided even though the GOP leadership says they’ve been working on it for more than six months. Let’s get into it.
1) The SALT divide: House Republican leaders are nowhere close to notching a deal on raising the SALT deduction cap. The House Ways and Means Committee has discussed a bunch of options, including a new $30,000 cap, up from the current $10,000 limit.
But four key New York Republicans – Reps. Elise Stefanik, Andrew Garbarino, Nick LaLota and Mike Lawler – nixed that option in a statement Thursday night. The SALT Caucus co-chairs also said they have no deal and blasted the entire negotiation. Blue-state Republicans say they’re nowhere close to an agreement with GOP leaders over the issue.
Speaker Mike Johnson sent a text to a group of New York Republicans noting that he wasn’t part of the $30,000 offer and expressed displeasure that the blue staters issued a public rebuke:
“Guys, I am not on W&M and was not involved in any final discussions about a number. I haven’t spoken to anybody on the committee about this, and I’ve been in flight for the last 3 hrs. A negotiation with the tax writers will be much more productive internally.”
This isn’t an idle back and forth between members. It’s a critical part of the tax package with an impact running into the hundreds of billions of dollars.
Ways and Means can mark up a bill without a deal that satisfies all of the SALT holdouts. But that would almost certainly lead to a showdown before the House vote, potentially forcing Johnson to fix the bill in the House Rules Committee or on the floor with a manager’s amendment.
2) The Trump factor: We scooped Thursday that Trump told Johnson in a private call that he wanted a new top tax rate. Trump is seeking a new 39.6% tax bracket for individuals earning more than $2.5 million annually and married couples earning more than $5 million per year.
A new tax bracket for ultra-wealthy Americans would be a seismic shift for the Ways and Means Committee. Johnson has been opposed to raising individual tax rates, even for the very rich. But Trump’s push could scramble the dynamics for House Republicans heading into next week’s markup.
House Ways and Means Committee Chair Jason Smith (R-Mo.) will meet with Trump today. Politico broke this news Thursday.
Trump also asked Johnson to consider closing the carried interest loophole. This is a massively divisive issue on Capitol Hill and GOP leaders in both chambers are cool to the idea.
And Trump suggested to Johnson that Congress should create savings accounts for newborns. House Republican leadership isn’t entirely clear what Trump wants to do here but some have suggested that Trump is referring to this program.
3) Medicaid woes: House GOP leadership still hasn’t decided on the size and scope of Medicaid cuts. To be honest, Republicans have been all over the place on this.
Johnson took FMAP changes off the table Thursday, but then he said per capita caps for Medicaid recipients were still on the table. Senate Republican leaders have criticized the House GOP for being too cautious over cutting Medicaid and other social safety net programs.
4) Pension problems: House Majority Leader Steve Scalise told us Thursday that the leadership is talking about nixing changes to the federal pension program. The House Oversight Committee planned to drastically change the pension formula.
On Capitol Hill, the GOP proposed basing the pension on an employee’s top five years of pay instead of the top three years. They also forced employees to pay a higher percentage, 4.4% of their salary into the Federal Employees Retirement System.
Scalise said there’s been “a lot of internal conversation about a couple of items like that.”
5) Ag unknowns: House Agriculture Republicans are planning to include a $60 billion “skinny” farm bill in their reconciliation section, as we reported last week. The traditional five-year farm bill failed to move through Congress last year, and this is the GOP’s way of getting crucial provisions done without negotiating with Democrats.
Still, it’s unclear how much of the farm bill House Republicans can ultimately enact. Senators have warned that many of these proposals will run afoul of the Byrd Rule, which dictates what can happen in the Senate via reconciliation.
The major question remaining for the House Agriculture panel, though, is how their SNAP cost-sharing plan will score. The committee is waiting on final CBO scores on their proposal to shift around 10% of SNAP costs onto the states. That’s a plan that GOP moderates like but may not score high enough to reach the $230 billion in cuts the panel is required to produce under its reconciliation instructions.
