GOP Tax Reform Plan Could Ax State and Local Tax Deduction

Chris Gaetano
Published Date:
Apr 18, 2017

While Republicans are generally known for supporting tax breaks, one has been in their crosshairs for some time, and could be a casualty of the party's tax reform plan: the federal deduction for state and local tax payments, according to Bloomberg. For years taxpayers have been able to deduct payments to state and local governments from their federal taxable income, but Republicans are increasingly calling for an end to this ability, which mostly benefits those in high-tax states like New York, New Jersey and California. The thinking is that the ability to deduct state and local taxes from federal income tax essentially subsidizes tax increases and only serves to transfer money from low-tax to high-tax states. However Bloomberg notes that getting rid of this tax deduction could prove to be a difficult political battle even without taking Democrats into account: Republican representatives from blue states may not take kindly to having to announce a tax increase to their own constituents. In particular, it might upset the wealthier taxpayers who are the primary beneficiaries of this deduction: the Tax Policy Center estimates that ending the deduction would bring the federal government $1.3 trillion over 10 years, 90 percent of which would be paid by people making $100,000 or more a year. 

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