Politics

A group of GOP centrists threatens hardline tactics on tax bill

A group of House Republican centrists is taking a page from their hardliner colleagues, demanding critical changes to their party’s signature tax plan — and threatening to hold the bill up until they get it.

A small band of Republicans from New York, New Jersey and California is effectively blocking the House GOP’s tax plan from reaching the floor anytime soon as they seek relief for taxpayers back home who’ve been hit with heftier bills due to a Trump-era tax law that limited a key deduction.

“We’ve seen some great things happen and some other crazy things happen when just a few people band together and insist on an important issue,” said Rep. Nick LaLota (R-N.Y.), who represents Long Island. “Leadership understands there’s a number of us who need that to be in any sort of tax package.”

LaLota has helped lead a group of roughly 10 members as they’ve backchanneled with GOP tax-writers, pushing for a long-elusive deal on expanding state and local tax relief. The delay underscores the enormous influence that any small group of determined Republicans can wield in the fractious, five-seat majority House — this time, from the center of the party.

Top Republicans once hoped to bring their roughly $240 billion marquee tax plan to the floor before the August recess, as Speaker Kevin McCarthy attempts to jumpstart a critical round of tax talks with the Senate and the White House. It’s among few pieces of major legislation that has a chance of making it to President Joe Biden’s desk this term, one that lawmakers hope will feature much-anticipated items like research and development relief for companies and an expansion of the child tax credit.

But those plans are now stalled as party leaders attempt to satisfy the so-called SALT Caucus without infuriating dozens of House conservatives who detest the change. House Ways and Means Chair Jason Smith (R-Mo.), a conservative with huge sway over the tax bill, once lambasted the deduction as “a handout to their political donors and allies.”

Negotiations have been intensifying in the final weeks of July, but many GOP lawmakers remain skeptical of floor action in the coming weeks, or even months.

“I will not support any tax package that does not include a fix on SALT,” said Rep. Mike Lawler (R-N.Y.). “The fact that the bill was marked up but hasn’t come to the floor obviously is an indication that there’s not the necessary 218 votes to pass something here.”

It’s an unusual position for many of those centrist Republicans, who are typically among McCarthy’s reliable votes to steer the GOP agenda through its narrow majority. That’s been true even as their hardline conservative colleagues have repeatedly forced them into tough political votes on abortion, guns and censuring fellow members.

Further complicating the spat are the politics at play: The same group of Northeasterners and Californians demanding tax relief hail from some of the party’s most endangered districts across the map. Take Rep. Mike Garcia (R-Calif.), who sits in one of the GOP’s toughest seats for 2024 and once described his party’s treatment of state and local taxes as a “legislative middle finger” to his high-tax state.

“I won’t be able to support that, obviously,” Garcia said of a tax bill that didn’t include tweaks to the state and local tax deduction cap. Without the change, he said: “It’s not moving anywhere.”

The persistent conservative heartburn over the idea is a major problem, however. Oklahoma Rep. Kevin Hern — who leads the House GOP’s largest ideological group, the Republican Study Committee — predicted many of his members would vote against the tax plan if it did include SALT.

“Absolutely,” the RSC chair said when asked if such a change would cost conservative votes. He pointed out that repealing the tax deduction cap would cost about $90 billion per year: “That’s sort of the opposite direction where we want to go.”

That resistance includes Smith, the lead on GOP’s marquee tax package, who has championed tax cuts for farms and small businesses but has previously echoed a common Republican refrain that SALT primarily benefits taxpayers from wealthy, blue states.

The bill also includes greater allowances for tax deductions on business assets and research and developments expenses; a relaxation of tax reporting requirements for users of third-party marketplaces like eBay and StubHub; and an expansion of a program intended to facilitate investment into low-income communities for rural areas, among other items.

It’s paid for by repealing some energy credits in Democrats’ major domestic bill last year, and includes an across-the-board boost to the standard deduction that many observers interpreted to at least partially be an effort to appease the SALT Caucus.

As pressure grows to clear the bill this year, GOP talks on the SALT issue have been intensifying behind the scenes. That includes a meeting Thursday between staffers for the SALT group and the powerful Ways and Means panel. The main purpose, according to several GOP members, was to discuss the costs of their various proposals to lift the current $10,000 cap on the deduction — and how they could offset it.

Smith’s outreach appears to have been successful with at least one member of the SALT group: Rep. Nicole Malliotakis (R-N.Y.).

Malliotakis, a founding member of the SALT Caucus, acknowledged in an interview that the group would never get a full repeal of the deduction cap. She said she would like to get the economic package out the door of the House as it is, with the hope that both Republicans and Democrats could fight for some relief during conference negotiations with the Senate.

“I want something to happen in this Congress, whether it’s even something small for the next few years,” said Malliotakis, who also noted that the caucus should be mindful that the SALT cap expires along with the bulk of Trump’s tax cuts in 2025.

Part of the reason for Malliotakis’ position may be the fact that taxpayers in her district, which encompasses Staten Island and southern Brooklyn, have a relatively lower median income and thus end up owing less in state and local taxes than taxpayers in districts represented by other SALT Caucus Republicans. She also landed a coveted seat on the Ways and Means Committee in the spring.

One lawmaker involved in the tax discussions said that Malliotakis shifted her stance after she helped secure language to boost the standard deduction, which was spearheaded by another fresh face on the tax-writing committee, and fellow SALT Caucus member, Michelle Steel (R-Calif.).

As Republicans search for a solution, the next stage of the talks will depend, at least partly, on the Joint Committee on Taxation releasing more specific data on the potential cost of lifting the cap. Proposals on the table include expanding the deduction by certain amounts, providing more relief for married couples and putting income limits on who can qualify.

“We need to see something happening,” said Rep. Andrew Garbarino (R-N.Y.), whose staff has been working closely with Smith’s. Asked if GOP leaders have signaled if they will relent on the issue, he said: “I think leadership wants to be able to pass a bill.”

Olivia Beavers contributed to this report.

Usually it’s the conservative bloc of House Republicans stirring trouble. This time, it’s centrists who are threatening to hold up a signature party bill.  

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