A new fight between Republicans is brewing on Capitol Hill over the future of the federal deduction for state and local tax payments — or SALT.

Senate Republicans are threatening to upend a deal crafted by their GOP colleagues in the House, offering a counterproposal that some New York Republicans are dubbing “a non-starter” and “dead on arrival.”

What You Need To Know

  • Several Republican members of Congress from the New York City suburbs — including Reps. Mike Lawler and Nick LaLota — are balking at the $10,000 SALT cap proposal in the Senate draft of President Donald Trump's sweeping agenda bill
  • The House version boosted the cap on the federal deduction for state and local taxes to $40,000 from the current $10,000 level
  • Although some are portraying the Senate proposal as a starting point for negotiations, Lawler and LaLota argue there is nothing to negotiate
  • Asked what he would say if he ended up voting for something less than a $40,000 cap, LaLota said, “You — and more importantly, my constituents — would chop my head off”

The SALT agreement approved by the House as part of their version of President Donald Trump’s sweeping spending and tax cuts package would raise the cap on the deduction to $40,000 a year, or four times the current level. 

But the tax and spending bill proposed by Senate Republicans late Monday would not change the cap, keeping it at the current $10,000.

“In the Senate, at least, there isn't a high level of interest in doing anything on SALT,” Senate Majority Leader John Thune told Fox News on Sunday. “We believe, as a matter of policy, you don't want to have low tax states subsidizing high tax states.” 

Several Republican members of Congress from high-tax states and the New York City suburbs are balking, including Reps. Mike Lawler and Nick LaLota.

Although some are portraying the Senate proposal as a starting point for negotiations, Lawler and LaLota argue there is nothing to negotiate, telling Spectrum News, in short: $40,000 or bust. 

“One penny less is a no,” Lawler recently told Spectrum News. 

“We've already had our negotiations. We've already made our compromises. The time to negotiate is over,” LaLota said. “It's $40,000 or unlimited. The Senate can choose.” 

If lawmakers pass no legislation extending a cap on SALT, the cap is set to automatically expire at the end of the year, making the SALT deduction unlimited.

Because of the tight margins on Capitol Hill, these New Yorkers have leverage over negotiations. But with the fate of the president’s broader agenda on the line, these lawmakers also face a big test: How far are they willing to go to hold the line? 

Asked what he would say if he ended up voting for something less than a $40,000 cap, LaLota said, “You — and more importantly, my constituents — would chop my head off.”

In a statement on the path forward for SALT, House Democratic Leader Hakeem Jeffries of Brooklyn said, “Donald Trump and the Republican Party destroyed the state and local tax deduction in 2017. House Republicans in New York promised to fix it. They are failing miserably.”

Beyond SALT, Republican leaders on Capitol Hill are also wrestling with several other issues as part of this legislative package, from the future of clean energy tax credits to Medicaid cuts. What pleases the House may not pass muster in the Senate, or vice versa. 

In short, getting this bill done is going to require a delicate balance.