- The House passed the Senate budget resolution, setting up the fast track for tax reform.
- The vote was close, with 20 GOP members voting against the resolution because of concerns over a provision in the “Big Six” tax reform framework.
- The narrow victory is a sign of the difficult tax reform process to come.
In a positive step for Republican leaders that cleared the deck to move forward on tax reform, the House passed the Senate’s budget resolution on Thursday. The move paves the way, procedurally, for Republicans to fast track their overhaul of the US tax code.
Under the surface, however, the budget vote belied some fissures within the party that could threaten the path ahead. Twenty Republican members voted against the resolution. Many more expressed dissatisfaction with a key part of the tax plan but stopped short of voting against the measure.
Some Republicans oppose the elimination of the state and local deduction, which is proposed in the Republican tax reform framework. (The actual legislation is set to be released next week.) The SALT deduction allows Americans to shave off the amount they pay in state and local taxes from their federal burden.
People in states with high taxes, like New York and California, benefit to a greater extent from this deduction. GOP lawmakers from those states expressed trepidation to its potential repeal, and many eventually voted against the budget resolution because of it.
While House Republican leaders have promised a compromise on the issue — for instance, perhaps only repealing the deduction for people making more than a certain income level — the uproar also highlights a larger problem for the party.
The SALT deduction was just one of several deductions, exemptions, and benefits that could get changed or eliminated outright in the forthcoming tax bill. Touching any of these provisions risks drawing the wrath of constituents, interest groups, and the general public.
Republicans can only afford to lose 22 votes in the House and two votes in the Senate to pass any legislation along party-line votes. So any one member in the Senate or small block in the House wield significant power over the process. And accommodating all members could be a gargantuan task for Republican leaders.
As Chris Krueger, an analyst at Cowen Washington Research Group, has said, there were little to no actual details on potential deduction eliminations in the tax framework released by the “Big Six” tax negotiators. He said that was because it would inevitably draw resistance.
“It is not like the Big Six got stuck on some Einstein proof or concepts around Newtonian mathematics,” Krueger wrote in a note to clients. “They literally stopped short of simple arithmetic. It is not because they do not know how to add, it is that the political pain is in subtraction.”