House Ways and Means Tax Subcommittee Chairman Mike Kelly (R-PA) said Republicans will have a greater challenge enacting tax cuts than they did during President-elect Donald Trump’s first term because of the GOP’s tenuous majority in the House.
Kelly, who has been in Congress since 2011 and was on Ways and Means when the Tax Cuts and Jobs Act was first negotiated in 2017, told the Washington Examiner in an interview that back then, Republicans could afford to lose more than a dozen votes — but now that is not the case.
“We don’t have a big majority this time,” he said, noting that several Republican lawmakers in the House voted against the TCJA, better known as the Trump tax cuts, when it was first passed through Congress in 2017.
“This time we can’t do that,” Kelly said. “We can’t lose hardly anybody if we’re going to succeed with this, so it’s going to take a lot of getting up early and going to school and having all types of meetings and briefings where people can see where this leads.”
In 2017, Republican leadership could merely ignore certain individuals or small groups of lawmakers demanding something be included or excluded from the tax legislation. But with next year’s tiny majority, they won’t be able to because Republicans will be able to lose only one or two votes and still pass bills over Democratic opposition. The matter gets even more complicated when the Senate and coming to agreement between the two chambers is considered.
Republicans are hoping to extend and expand the individual tax cuts included in the 2017 overhaul, which are set to expire at the end of 2025 under current law.
The narrowness of the majority will also give groups of lawmakers who are steadfast on a single issue more power than in 2017. Historically speaking, it is much easier for factions in the House to wield power when a party holds only tenuous control of the chamber.
One group that could be empowered is the “SALT caucus” group of lawmakers who are pushing to expand federal deductions for state and local taxes paid. Trump’s 2017 Tax Cuts and Jobs Act included a $10,000 cap on SALT deductions, and lawmakers in high-tax jurisdictions such as New York and California have been adamant about raising or eliminating that cap.
Some lawmakers in the group, like Rep. Nick LaLota (R-NY), have said that they will not vote for the reconciliation package unless it significantly raises or eliminates the cap. LaLota even said that doubling it to $20,000 isn’t enough to earn his vote. But then there are others in the group, such as Rep. Nicole Malliotakis (R-NY), who appear more open to compromise on the issue.
Kelly on Friday said he is well aware that changes to the SALT cap is a political hot potato for some of the lawmakers in the SALT caucus and could be an election-deciding issue for them. He said he recognizes the need to negotiate and come to an agreement that can ensure enough votes on the tax bill while insulating members from political blowback.
“We have to look at what is it that we can do that somehow threads the needle, or we’re able to put it together so it doesn’t eliminate people being [in Congress] because of a policy that wasn’t able to be handled,” Kelly said.
“An obvious concern is does it make it impossible for these people to get reelected if they don’t get something done that’s favorable,” he added. “For those members it’s a huge issue — we’ll find a way, I can’t believe we won’t find a way to somehow get through that it ends up more positive than negative and we do something we can sell.”
The subcommittee chairman also thinks that this time around, Trump will play a key role in the tax negotiations and called him the “biggest elephant in the room.” Of note, Trump made several costly campaign promises that would presumably be tied to the tax package. For instance, he called for a deduction for interest on auto loans and for Social Security income to be exempted from taxation.
Kelly said a challenging part of crafting the tax package will be trying to find ways to pay for the massive piece of legislation.
“That’s going to be really hard,” the congressman said.
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Permanently extending the expiring individual income tax provisions of TCJA would add $3.4 trillion to deficits, according to the Penn-Wharton Budget Model, a group housed at the University of Pennsylvania’s business school that analyzes the fiscal effects of public policies. But with business provisions, it could come to more than $4 trillion.
Still, despite the razor-thin margins, breakaway factions, and challenges with finding revenue raisers, Kelly said he is confident that Republicans will, as in 2017, be able to negotiate their way to a deal.