Editor’s note: The House passed the bill the morning of 5/22 by a vote of 215-214. One member voted “present” and two did not cast votes. The Rules Committee markup ended after 10:30 p.m. ET, with members voting along party lines 8-4 to advance the proposal after incorporating certain revisions. Late-night amendments included the SALT cap proposal discussed in this article, which is current as of Wednesday afternoon, 5/21.
Republicans’ reconciliation bill that includes tax extenders and new tax cuts reached the House Rules Committee — the last step before floor consideration — on May 21.
The committee convened just after 1:00 a.m. ET on May 21 to debate the One Big Beautiful Bill Act (H.R. 1) — and over 500 amendments largely submitted by Democrats. House Speaker Mike Johnson (R-LA) has been pushing to pass the bill before Memorial Day, but committee discussions continued late Wednesday afternoon.
And while the bill was expected to advance out of the Rules Committee, its fate on the House floor — as well as the fate of the state and local tax (SALT) deduction and further spending cuts demanded by fiscal conservatives — were unclear as of press time.
Timing concerns. Democrats kicked off the 1 a.m. hearing by objecting to the unusual start time. Rules Ranking Member Jim McGovern (D-MA) promptly made a move to adjourn the hearing. “If Republicans are so proud of what is in this bill, then why are you trying to ram it through in the dead of night?” he asked. Ultimately, McGovern’s motion to adjourn and reconvene at a “reasonable hour” failed.
But Rules Chair Virginia Foxx (R-NC) defended the hearing’s timing. “I do not think there’s anything wrong with this,” said Foxx adding that unusually timed hearings and markups have “occurred under Democrat and Republican control.” Foxx predicted that, “in this case, I do believe we’ll be reporting not in the dark of night, but after the day has gone.”
Deficit impacts. According to Budget Committee Ranking Member Brendan Boyle (D-PA), the reconciliation bill’s cuts to Medicaid, the Supplemental Nutrition Assistance Program, Affordable Care Act programs and more, “don’t come close to paying for the cost of the tax cuts.”
McGovern also highlighted the bill’s impact on the deficit and the potential cuts to social programs. And he expressed concerns about the unequal distribution of benefits, with significant gains for the wealthy and minimal benefits for lower-income individuals.
According to the Congressional Budget Office’s analysis of the bill as advanced out of the Budget Committee on May 18, those in the bottom tenth of the income distribution would see their household resources decrease 2% in 2027 and 4% in 2033 under the OBBB. CBO attributes the decrease “mainly” to “losses of in-kind transfers, such as Medicaid and SNAP.” Those in the top tenth, however, would see their resources increase by 4% in 2027 and 2% in 2033, “mainly because of reductions in they taxes they owe,” said CBO.
But it’s not Democrats who have been the most vocal about the OBBB’s cost — House Freedom Caucus Republicans have been pushing for more spending cuts throughout the bill’s journey to the House floor.
Wednesday afternoon, deficit hawk Representative Chip Roy (R-TX) said the caucus was working with President Donald Trump and colleagues, “but there’s a long way to go.”
Memorial Day “is a completely arbitrary deadline set … to force people into a corner to make bad decisions,” Representative Scott Perry (R-PA) emphasized Wednesday. “It’s more important to get this right, to get it correct, than to get it fast,” he added.
And Boyle cited numerous organizations “from nonpartisan, to center, to center-right” that had called out the deficit impacts of the bill. He called out reports from the Committee for a Responsible Federal Budget, the Yale Budget Lab, Penn Wharton Budget Model, and Manhattan Institute, adding “the list goes on and on.”
SALT negotiations. The cap on state and local tax (SALT) deductions has also been a contentious provision of the OBBB.
The 2017 Tax Cuts and Jobs Act capped the SALT deduction at $10,000 through the end of 2025. The draft under discussion Wednesday called for raising that cap to $30,000 with a phase-down for those with over $400,000 in modified adjusted gross income. (Or a $15,000 cap and $200,000 MAGI for marrieds filing separately)
SALT Republicans, however, have been pushing for a higher cap and less stringent income limitations. House Ways and Means Chair Jason Smith (R-MO) was noncommittal when asked during Wednesday’s hearing about where the forthcoming manager’s amendment to OBBB would land on the SALT cap.
Smith said the cap as passed out of Ways and Means “was a reasonable compromise that would help provide necessary tax relief.” As far as any modification to the cap, Smith said “that’s going to be the discussion of the Rules Committee when the manager’s amendment is offered.”
However, earlier that morning, Boyle testified that “if the SALT cap is raised even further … then basically one of two things would happen — either the majority would have to find even more cuts in order to pay for the loss of revenue, or you would simply see these deficits increased by even more.”
Deloitte Principal Anna Taylor, during a webinar that ran concurrently with the Rules hearing, noted that the bill advanced out of the Budget Committee on Sunday without clear resolution of differences between House Leader Mike Johnson (R-LA) and hardline members of the party who oppose the provision affecting the TCJA’s cap on SALT deductions.
Some Republicans are looking for a higher SALT cap and have indicated they will not vote in favor of a bill with the SALT levels where they are. Last Friday, four Budget Committee Republicans voted with Democrats to strike down the bill in committee, but voted “present” Sunday to move it along and negotiate SALT later in the week.
Taylor said it “looks like” a “deal is coming together” between SALT holdouts and Republican leaderships. According to Taylor, the compromise may be a $40,000 cap “with a little bit of indexing for inflation, slowing phasing out on incomes above $500,000.” These levels would be in place “for the full 10 years, so we’ll see if this is going to hold — this is where it seems like the speaker wants to head in this negotiation.”
Jonathan Traub, the Deloitte webinar’s other panelist, observed that the bill does “not touch corporate SALT.” But under the proposal, Congress would “limit the ability of pass-throughs to use work-arounds to shield their partners and owners from the SALT cap where the tax is paid at the entity level.” He explained that the “deductions are then passed on to the partners.”
Traub was not “surprised by its inclusion” but would have expected it “would be included if there was a cap on corporate SALT.” He added that “we’re going to see potentially some pushback on that when we get to the Senate.”
Taylor said the SALT negotiation is a balance between budget and political costs. A SALT cap higher than the $30,000/$400,000 proposal could come at the cost of spending cuts to programs elsewhere. Traub used the analogy of a balloon. “If you squeeze here, the air goes somewhere else.”
“So if you give more relief on SALT … that costs money” but appeases fiscal conservatives, he said. On the flip side, cutting Medicaid funding, for example, may not sit well with moderates.
What’s next? Taylor cautioned that SALT changes may potentially result in legislation that “would violate the rules around budget reconciliation” by going “beyond what the committees were instructed to do. For instance, the House “may fall short of its target of $1.5 trillion dollars of spending cuts” or end up with “more than $4 billion in tax cuts.”
In this scenario, the House “will have a waiver of any points of order that lie against the bill. And the rule will pass with a civil majority vote in the House floor, and assuming it passes, no points of order lie against the bill,” said Taylor. This is different from Senate procedures, she continued, as the upper chamber “has no ability to use a majority vote to waive a point of order if they fall short of their spending targets or they exceed their tax cuts targets.”
Either would “trigger a 60-vote threshold that basically takes away the real power of reconciliation, which is to do this … with only 51 votes in the Senate,” according to Taylor.
Another question for the Senate is whether the bill will be a “full substitute” or an amended version of the House bill. Senators could take issue with the House’s reliance on the so-called current policy baseline for the purposes of forecasting the bill’s impact on the deficit.
There is a “presumption” that all of the TCJA extensions would “no longer score” and be treated as having a $0 revenue effect,” Taylor said. “And if those policies have a $0 revenue effect, then they cannot be in a reconciliation bill that’s all about raising or lowering revenues.”
Traub added that in order for the bill to reach the Senate, Speaker Johnson will seek a House vote in order to stay on track with the Memorial Day deadline. “He has threatened to cancel the Memorial Day recess if he needs to keep members in town.” While “members always rebel against that,” the threat “forces members” to act with urgency.
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