As President Trump prepares to kick off his sprint to the end of 2025 when his first-term tax bill is set to expire, he faces a decision that could shovel would-be federal dollars back to some of Vice President Harris’s most ardent supporters.

Welcome to Washington, where a small but vocal group of congressional Republicans are demanding the president-elect include in his 2025 tax bill a giveaway to wealthy, educated blue-state suburbanites — a voting bloc that has rejected Trump since he first emerged on the political stage nearly ten years ago. 

It’s starting to look like the president-elect has found himself sleep-walking into a Western-type standoff between deficit hawks and blue-state moderates. With a maximum House majority of just 219 members, Trump can’t afford to upset the dozen-or-so lawmakers pushing for the blue state tax relief. 

The state and local tax — or SALT — deduction, currently allows individuals and couples to get relief from the federal government by deducting up to $10,000 of their state and local taxes from their federal tax bill. The deduction overwhelmingly affects those living in states that voted against the president-elect’s candidacy this year. 

The SALT caucus — a bipartisan group of around 30 lawmakers from states like California, New Jersey, and New York — has been pushing for an increase in that cap for years. One of the group’s most outspoken members, Congressman Mike Lawler, told reporters on Capitol Hill last week that he will not vote for any tax bill that does not include a SALT deduction cap increase. 

On Saturday, Republican members of the SALT caucus met with the president-elect at Mar-a-Lago to lay out their demands for a lift on the cap. The soon-to-be 47th president indicated he was open to a deal. Mr. Lawler had a bill on the floor last year that would have doubled the cap to $20,000 for couples, though that was rejected by a vote of 195 to 225, with 18 conservative Republicans joining Democrats to kill the legislation. 

It is one of the rare moments where ardent conservatives and Congress’s most liberal members have agreed. A Freedom Caucus member, Congressman Chip Roy, pointed out at a Rules Committee meeting last year that the cap increase would only help “some middle-income folks” in just a few states. Senator Sanders in 2021, when he was chairing the Budget Committee, called the full repeal of a SALT cap “beyond unacceptable,” though he claimed to be open to a “compromise approach.”

Even Mr. Lawler’s proposal to double the cap to $20,000 for married couples would be costly and force some significant spending cuts in order to avoid deficit spending, all while sending the vast majority of the benefits to voting blocs who supported Ms. Harris over Candidate Trump. 

According to a study of Mr. Lawler’s legislation that was conducted by the University of Pennsylvania’s Wharton School, the so-called “marriage penalty” repeal would reduce federal revenues by $159 billion over the next ten years if there is no income limit placed on who can use the deduction. The Tax Policy Center calculates that the benefits amount to, on average, an extra $1,400 a year to households that make between $430,000 and $1 million annually.

Those households that bring in fewer than $200,000 would see no benefit. 

On Wednesday, Mr. Lawler went even further with a bill that would increase the dedication cap to $100,000 for single filers and $200,000 for married filers, which the Wharton School estimates would reduce revenues by $829 billion in the next decade. 

This means that those who are most likely to benefit from a SALT cap increase are more likely to be wealthy and educated individuals in deep blue states — a key voting base for Ms. Harris. The outgoing vice president won voters making more than $200,000 by six points in November, won suburban voters by five points, and won college-educated voters by 13 points, according to Statista and the Associated Press. 

Ms. Harris’s collapse in the national popular vote in 2024 marks the first time in 20 years that a Democrat has lost nationally to a Republican. Trump’s strength in blue states that helped him clinch a popular vote victory didn’t come from suburban districts like Mr. Lawler’s, but rather in lower-income minority neighborhoods like the majority-Asian precincts in Queens, New York, the majority-Arab populations around Detroit, Michigan, and the majority-Hispanic communities in the Rio Grande Valley.

None of those groups would see much benefit from a SALT cap increase.  Ms. Harris narrowly won Mr. Lawler’s district last year. His seat, New York’s 17th District, is the 23rd-wealthiest in the nation, with an average income of about $118,000. 

The Tax Foundation studied a compromise approach where the individual SALT cap would be cut to just under $6,000 while the cap for married couples filing jointly would be re-instituted, but only up to about $12,000. That kind of cap system would increase revenues by more than $1.3 trillion over the next ten years. 

Of the subsidies and tax breaks and write-offs that are being considered by the new Republican trifecta, increasing the state and local tax deduction would be an error of policy and principle — but might be necessary to get the “one big bill” that Trump wants from Congress.

It’s a tough situation, because with the cap on the SALT deduction set to expire at the end of the year, doing nothing would return America to the era when SALT deductions were unlimited. So the logic is shaping up for a compromise. Call it the Art of the One Big Bill Deal.

Which may be one reason why the master of the art of the deal got elected to a second term in the first place. If one really wants to lower state and local taxes, the strategic play would be to run for a seat on the city council or for the state senate, or the assembly and start lowering state and local taxes where they are actually set.