The State and Local Tax Deduction and Fiscal Federalism
168 Tax Notes 2429 (2020)
24 Pages Posted: 18 Feb 2021
Date Written: June 30, 2020
This Article examines the state and local tax deduction as a mechanism of fiscal federalism, by analyzing the effect of the deduction, calculated as tax expenditures by state, on the imbalance of federal expenditures. It argues that, on the whole, SALT deduction was an effective, albeit imperfect, means of mitigating the imbalance of federal expenditures before the 2017 tax legislation. TCJA’s limit on the SALT deduction vastly undermined this effectiveness, while underscoring the inherent defects and obstacles in advancing federalism with a tax measure.
Keywords: tax law, federalism
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