Trump, Senators Discussed SALT Fixes at White House Meeting (1)

Donald Trump and Republican senators discussed ways to scale back the $40,000 state and local tax deduction cap in the House version of the president’s tax-cut bill, Senate Majority Leader John Thune said.

“There really isn’t a single Republican senator who cares much about the SALT issue,” Thune told reporters as he departed the meeting with Trump on Wednesday.

“It’s an issue that there’s a lot of passion for and about among Republican senators. Obviously, the House has different equities when it comes to that issue, but we’ll work it out,” he added.

House lawmakers agreed to increase the SALT deduction to $40,000, up from $10,000 in current law. The tax break is politically important for House Republicans representing high-tax areas near New York City and Los Angeles, but there are no GOP senators who hail from states where SALT is a major issue.

Senate Majority Leader John Thune

Photographer: Eric Lee/Bloomberg

Kansas Republican Roger Marshall after the meeting said senators should go back to House Speaker Mike Johnson to see if there is “wiggle room” on SALT.

“This is basically a $350 billion subsidy for blue states,” he told Bloomberg TV.

Trump and senators did not delve into the specifics of any new SALT proposal, Louisiana Republican Bill Cassidy said.

Senate Finance Committee Chairman Mike Crapo said there is no final decision on reducing the SALT cap yet.

“Nothing is resolved until everything is resolved,” he said.

Wednesday’s White House confab comes as senators face several hurdles to negotiate a tax-and-spend package that Trump wants to pass in the next month. Republicans, who will need to stay largely united to approve the legislation, are sparring over the size of the bill and the scope of the cuts.

“We’ll keep working with his economic team,” Wisconsin Republican Ron Johnson, a fiscal hawk and a holdout on the bill, said after returning from the White House. “We all want to have success here.”

The package would make permanent Trump’s 2017 tax cuts and temporarily eliminate levies on tips and overtime pay. The cost is partially offset by reducing Medicaid benefits spending and phasing out renewable energy credits.

But the cost of the bill — which the Congressional Budget Office on Wednesday estimated to add $2.4 trillion to the deficit over a decade — has become a key point of disagreement. Several Republicans, including Johnson and Mike Lee of Utah, have threatened to sink the bill unless it includes more cuts.

The White House has proposed repealing $9.4 billion in already-approved spending for public media and foreign aid — a request that “would be a piece of the overall effort to try and to rein in the size the cost of government, and to get our country on a more sustainable fiscal path,” Thune said.

Hours before the meeting Elon Musk, who until recently led Trump’s federal cost-cutting effort, urged Americans to call their members of Congress to “KILL the BILL” over the cost. Musk had earlier called the bill a “disgusting abomination,” igniting a public feud with Trump over the centerpiece of his legislative agenda.

Senators sought to downplay Musk’s criticism.

“I don’t think very many senators are interested in what Elon has to say. We are serious policymakers,” North Dakota Senator Kevin Cramer told reporters. “If Elon was giving me advice on how to get to the moon, I would listen.”

Trump scored a tentative win on Wednesday when CBO put out a separate report estimating that his tariff policies will raise $2.8 trillion over a decade, theoretically covering the cost of the tax cuts, plus some. One notable caveat: the CBO assessment assumes that tariffs remain at very high levels for the next decade — something Trump administration officials have not explicitly said is their intention.

The bond markets are also closely monitoring the overall cost of the bill, with some investors warning that adding too much to US government debt would worsen the country’s fiscal trajectory and weigh on economic growth.

“We’re paying close attention to the markets, and I think the markets in the end are going to react very favorable in the end to what we’re going to do and the pro-growth policies you’re going to see in this legislation,” Thune said earlier Wednesday.

CBO also estimated that the legislation would mean 10.4 million people would lose Medicaid coverage, a figure that could pose a political liability to Republicans. Several senators have raised concerns about the Medicaid cuts, putting them in direct opposition to the lawmakers who want to see bigger cuts.

(Updates with additional details throughout)

--With assistance from Tyler Kendall, Kate Sullivan, Skylar Woodhouse, Kailey Leinz and Joe Mathieu.

To contact the reporters on this story:
Erik Wasson in Washington at ewasson@bloomberg.net;
Steven T. Dennis in Washington at sdennis17@bloomberg.net

To contact the editors responsible for this story:
Megan Scully at mscully32@bloomberg.net

Laura Davison

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