As Republicans prepare to unveil their latest tax package, an old political headache is resurfacing: the state and local tax deduction, or SALT.

The deduction, capped at $10,000 since the GOP’s 2017 tax overhaul, has long divided the party. Many Republicans from low-tax states see it as a giveaway to wealthier taxpayers in blue states. But lawmakers from high-tax states like New York, New Jersey, and California have made lifting the cap a defining issue — and say they’re willing to derail the entire package over it.

Representative Nick LaLota, a New York Republican, has made his position clear: “If there’s not enough SALT in this bill, I’m pressing the red ‘no’ button,” he said. “It is a hill I am willing to stake my entire congressional career on.”

So far, negotiations between GOP leaders and holdouts like LaLota have made little headway. The party plans to release a draft of the tax package next week, but the SALT standoff threatens to upend not only that bill, but the entire Republican fiscal agenda.

Big Price Tag, Bigger Headache

Any increase to the $10,000 cap carries a hefty price. Even modest proposals — like doubling the cap for married couples — would cost about $230 billion over 10 years, according to the Committee for a Responsible Federal Budget. More generous versions, like those favored by some New York Republicans, could push the cost past $1 trillion.

That complicates an already tight budget: Republicans want to extend the bulk of the 2017 Trump tax cuts, which would cost about $4 trillion, and have allowed themselves just $4.5 trillion in total tax reductions — a number that assumes $2 trillion in spending cuts elsewhere.

“We need to have a fiscally responsible package,” said Representative Greg Murphy of North Carolina. “It is pathetic that we have to bail out high-tax states.”

Divided on Policy, and Politics

The 2017 SALT cap was designed to offset the cost of tax cuts and encourage more people to take the expanded standard deduction. Economists across the political spectrum have defended the cap, arguing it reduces a regressive benefit that mostly helped wealthy taxpayers.

“The SALT cap was probably the most progressive element of the Tax Cuts and Jobs Act,” said Leonard Burman, co-founder of the nonpartisan Tax Policy Center.

But critics of the cap argue it unfairly penalizes residents of states that invest heavily in public services. Some also see it as a partisan attack on Democratic-leaning states. President Trump, who originally signed the cap into law, said during his 2024 campaign that he now supports raising it.

Real estate agents have also lobbied against the cap, warning it raises the cost of homeownership and depresses demand in high-tax areas.

Gerhard Randers-Pehrson, an 81-year-old retiree from Ossining, N.Y., paid $16,000 in state and local taxes last year. He took the standard deduction but still supports a higher cap — within reason.

“I don’t think we should punish areas that try to do right by the municipal services they provide,” he said. But he also called a proposal to raise the cap to $100,000 “too high.”

No Consensus Among Supporters

Even among Republicans pushing for change, there’s no agreement on how far to go. Rep. Jeff Van Drew of New Jersey said a cap of $30,000 to $40,000 would suffice. Four New York Republicans blasted that figure as “insulting.” Rep. Young Kim of California suggested a $62,000 limit per person. Rep. Nicole Malliotakis of New York floated a more targeted approach, allowing a full deduction for taxpayers under a certain income threshold.

“I was always focused on people that I represent in Staten Island and Brooklyn, who mostly all make under $500,000,” she said.

GOP leaders remain optimistic they can broker a compromise. They’re also fielding a last-minute push from Trump to raise taxes on the wealthy — a proposal he appeared to quickly backtrack on via social media. “Republicans should probably not do it, but I’m OK if they do!” he posted Friday.

High Stakes, Tight Margins

With a razor-thin House majority, Republicans can only afford to lose three votes. In 2017, the party passed its tax law despite 12 Republican defections — nearly all from SALT-sensitive states. Among them was Rep. Elise Stefanik of New York, now a key Trump ally.

If no new deal is reached, the entire 2017 tax law is set to expire, automatically eliminating the $10,000 SALT cap. But that wouldn’t necessarily restore full deductibility: a now-defunct alternative minimum tax would kick back in, clawing back many of those savings.

Some Republicans see that outcome as a potential fallback.

“The Ways and Means Committee is going to come up with the number, which is great,” said Rep. Andrew Garbarino of New York. “But that doesn’t mean I have to vote for it.”