House Republicans appeared stuck in reconciliation limbo as of Wednesday morning with no changes to the text ready to be unveiled, after an all-night Rules Committee session that was still going strong.
Late Tuesday, GOP leaders appeared to have cemented backing from blue-state Republicans who’d been angling for a more generous cap on state and local tax deductions.
Sources described the tentative deal as upping the proposed $30,000 cap for households making up to $400,000, to a cap of $40,000 for households making up to $500,000. Those thresholds would also grow annually, a feature that wasn’t in the initial package.
But word of that arrangement sparked almost immediate blowback from members of the conservative House Freedom Caucus, whose leader on Wednesday morning accused GOP leaders of reneging on commitments to them regarding more aggressive trims to Medicaid and clean energy tax credits.
“We actually stopped negotiating just before midnight, because we actually had a deal that was then pulled off the table,” House Freedom Caucus Chairman Andy Harris, R-Md., said in an interview with Newsmax. “This bill actually got worse overnight, there is no way it passes today. And as I’ve said all along, we may need a couple of weeks to iron everything out, but it’s not going anywhere today.”
Republican leadership hadn’t pulled the plug yet, however, and talks were ongoing in Speaker Mike Johnson’s office, with boxes of Krispy Kreme donuts delivered on Wednesday morning.
“I’m talking to [Harris],” Johnson, R-La., said on his way in. “There is a chance for a vote today.”
The Rules Committee was giving GOP leaders plenty of extra time to negotiate. Nine hours after the 1 a.m. start of the meeting, the various committee chairs and ranking members with jurisdiction over the reconciliation bill were still testifying. Members who had filed 537 amendments hadn’t even got to the part of the hearing where they speak.
Two Freedom Caucus members who are on the Rules Committee — Reps. Chip Roy, R-Texas, and Ralph Norman, R-S.C. — have been part of the negotiations from the start, nearly derailing the measure in the Budget Committee last week.
Roy, Norman, Harris and Rep. Andrew Clyde, R-Ga., another one of the initial holdouts in the Budget Committee, were in the meeting in the speaker’s office on Wednesday. The group also included Republican Freedom Caucus members Keith Self of Texas, Clay Higgins of Louisiana and Scott Perry of Pennsylvania.
After leaving Johnson’s office, members of the group said the White House late Tuesday had made an offer that would cut back on additional “waste, fraud and abuse” in Medicaid as well as what they call the “green new scam” tax credits.
Harris stopped short of saying that GOP leaders, who also have to appease moderates in swing districts, had rejected the proposed agreement. But he said that if leadership decides to include it in the package, “I think it’s en route to get passed,” though maybe not before Memorial Day as Johnson has pledged.
“I don’t think it can be done today. I mean, the runway is short today,” Harris said. “The leadership is going to have to figure out, you know, where to go from here. But I think progress is made. I think that there is a pathway forward that we can see.”
Freedom Caucus members, along with Johnson, were expected to meet with President Donald Trump at the White House to talk things over later on Wednesday, a source familiar with the discussions said.
The Freedom Caucus has already negotiated a faster start to new Medicaid work requirements. But the conservatives remain upset that the bill as drafted would do nothing to even out a disparity that pays 90 percent of costs in Medicaid expansion states for adults without disabilities, but around 70 percent on average for the more traditional Medicaid population.
In a statement posted to X early Wednesday, Roy contrasted the lack of cuts to the federal match, known as FMAP, with the bigger “SALT” deduction that mostly helps blue states.
“Imagine if Congress chose inspirational policy to lead America rather than buying a handful of seats with $350 Billion in parochial tax subsidies in the form of SALT — while giving 7 times MORE money to the able-bodied than vulnerable Americans on Medicaid wait-lists,” Roy wrote.
SALT details
The SALT deal, which Johnson said would be unveiled “soon,” would immediately increase the cap to $40,000, rising by 1 percent each year until it hits $44,000 in a decade. The income threshold would grow to more than $550,000 by the 10th year.
The bigger deduction would phase down by 20 cents for each dollar above the income threshold. So once a taxpayer hits $650,000 in income in the first year, for example, they would be back down to the current $10,000 SALT cap.
The cost would be $344 billion over 10 years, a source familiar with the proposal said — which Roy appeared to have some knowledge of, based on his X post.
Trump, who appeared to criticize the push by some blue-state Republicans for a bigger SALT deduction during a meeting with the GOP conference on Tuesday, is expected to endorse the deal, a source with knowledge said.
Silencers, tanning beds
Potentially multiple manager’s amendments were expected dealing with different aspects of the bill that were still being negotiated.
While SALT, Medicaid and faster phase-outs of the clean energy tax subsidies in Democrats’ 2022 reconciliation package were the big-ticket items under discussion, other issues continued to crop up as well.
Clyde, a gun store owner, among others has been pushing for additional relief from firearms-related taxes that have been on the books for decades. The bill currently would repeal the $200 sales tax on silencers, also known as suppressors. Second Amendment advocates want to get rid of more taxes, including on the manufacture and sale of firearms like short-barrel rifles.
Gun Owners of America, an advocacy group, posted a photo after meeting with Roy on Wednesday, quoting him as saying: “I think we’re making progress on suppressors. Still work to be done on short barrels, but we’re making progress.”
GOA and other advocates also want to remove suppressors and short-barrel rifles from registration requirements under the National Firearms Act, but that’s likely problematic under the Senate’s “Byrd rule,” which bars nonbudgetary material from inclusion in a reconciliation bill.
Democrats on the Rules Committee questioned the bill’s priorities, contrasting the $1.4 billion tax break for silencer purchases and a separate provision that would repeal a 10 percent tax on indoor tanning services, with the GOP push to cut Medicaid and food stamps.
“They’re repealing an excise tax on tanning beds … and if you need a hospital bed in rural America, I’m sorry, you’re out of luck,” Rep. Teresa Leger Fernandez, D-N.M., said. “And I don’t know where this particular provision came from, but we do know that there are certain elected officials who appear to have a certain orange hue about them, that maybe they want to make sure that tanning beds get a little bit of special credit.”
Paul M. Krawzak and Peter Cohn contributed to this report.
