Some House Republicans want to hold up a major tax bill until it includes a big break for wealthy blue state residents

• Some House Republicans are pushing yet again to revisit the SALT deduction.
• That deduction primarily benefits high-earning taxpayers in high-tax states.

House Republicans are squabbling over a tax cut for the wealthy — and it's a well trodden battle across party lines that could once again potentially sink a big legislative package.

That State and Local Tax deduction — known as SALT — has proven to be a bipartisan scourge, with Republicans and Democrats alike from impacted areas rallying to restore the tax break to a more generous level. Now, it could prove perilous as the slim House majority tries to move forward a tax bill.

SALT functions as a deduction that taxpayers can claim for state and local taxes, which makes a bigger difference for those who live in high-tax states — like New York, New Jersey, or California. Previously, the deduction was unlimited. However, former President Donald Trump's 2017 tax bill placed a $10,000 cap on the deduction, drawing the ire of legislators in heavily impacted states.

"I remain adamantly opposed to the SALT cap," Rep. Chris Smith (R-NJ), who spoke out and voted against the legislation that created the SALT cap in 2017, told Insider in a statement. "Extending the SALT cap, which is set to expire, would continue an unacceptable and unfair burden on New Jersey taxpayers, who already pay more than our fair share to the federal government," said Smith, noting that on various indexes, New Jersey ranks near or at the bottom in receiving returns on tax dollars the state's residents send to Washington.

Republicans from California, New York, and New Jersey are, according to Politico and the Washington Post, eyeing stopping a tax package that the Ways and Means Committee passed in June from moving forward. That bill would further beef up the standard deduction, which was almost doubled under Trump's 2017 legislation.

"I promised Long Islanders I would fight tooth and nail to restore our SALT deduction. Any tax bill without a fix will not get my vote," New York Republican Nick LaLota said in a Wednesday tweet. With a thin Republican majority in the House, any group of GOPers dissenting could prove to be the downfall of a bill.

"It's an incredibly regional battle," Marc Goldwein, a senior policy director at the Committee for a Responsible Federal Budget, told Insider. The deduction unites strange bedfellows of Democrats and GOPers alike, many of whom represent those in high-tax states.

"It's totally bizarre, and it's really frustrating that, basically, there's a small handful of Republicans that are like, you can't have your tax cut unless we get an even bigger tax cut," Goldwein said.

This isn't the first time that SALT has held up a prospective economic package: In 2022, some House Democrats threatened to sink President Joe Biden's Build Back Better package if it did not include a SALT rollback. Howard Gleckman, a senior fellow at the left-leaning Tax Policy Center, noted that the last round of elections led to more Republicans representing high-income swing districts in states like New York; now, those representatives are carrying on that SALT mantle.

"They basically said that the Democrats in those districts couldn't deliver fixing the cap," Gleckman said. "And if you elect me, I'm going to deliver."

In February, lawmakers on both sides of the aisle re-formed what they call the "SALT Caucus." The bipartisan group, which includes Democratic Reps. Josh Gottheimer of New Jersey and Katie Porter of California, alongside Republicans like New York's Andrew Garbarino and California's Young Kim, wanted to renew a push to restore SALT.

"Restoring the SALT deduction will get more dollars back into the pockets of millions of hard-working, middle-class Jersey residents and families across the country who are already struggling with higher costs," Gottheimer, co-chair of the SALT Caucus, said in a statement to Insider. He added: "There is bipartisan support for restoring the SALT deduction which will put direct pressure on Republican leadership to listen to the millions of struggling middle-class families and take action to restore SALT."

As of 2021, a rollback would have meant that households who make $1 million or more annually would get half the benefit of a repeal, according to the Tax Policy Center, while 96% of households that made about $52,000 to $93,000 would see no reduction.

"Most of those people who are affected by this are upper income people, not the richest people, but upper income people, people making $300,000, $400,000 a year," Gleckman said.