Ending the Local Tax Deduction
9 Pages Posted: 21 Jan 2016
Date Written: 2015
Under this proposal, local taxes would not be deductible for federal purposes, but state taxes would continue to be deductible. A deduction for local taxes is less justified because they provide benefits to local taxpayers in ways that make them more similar to a purchase of private goods, for which a deduction is generally not allowed. State taxes, on the other hand, are more likely to be redistributive, and a deduction for them is therefore more appropriate. The proposal is estimated to raise $45.1 billion in 2016.
The proposal is made as a part of the Shelf Project, a collaboration of tax professionals developing methods for raising revenue in ways that improve the fairness and efficiency of the tax base. Shelf Project proposals imitate committee reports in describing current law, discussing the reasons for change, and explaining the proposal.
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