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1 Jared Walczak, The State and Local Tax Deduction: A Primer 1 (2017)

handle is hein.taxfoundation/stlocxdu0001 and id is 1 raw text is: FISCAL FACT No. 545 Mar. 2017 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non-profit organization. @2017 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org The State and Local Tax Deduction: A Primer Jared Walczak Policy Analyst Key Findings * Taxpayers who itemize deductions on their federal income tax are permitted to deduct certain taxes paid to state and local governments from their gross income for federal income tax liability purposes. * State and local tax deductibility would be repealed under the House Republican Blueprint, and capped-along with other itemized deductions- under the campaign plan put forward by President Donald Trump. * The state and local tax deduction disproportionately benefits high-income taxpayers, with more than 88 percent of the benefit flowing to those with incomes in excess of $100,000. * The deduction favors high-income, high-tax states like California and New York, which together receive nearly one-third of the deduction's total value nationwide. Six states-California, New York, New Jersey, Illinois, Texas, and Pennsylvania-claim more than half of the value of the deduction. * The state and local tax deduction in New York and California represents 9.1 and 7.9 percent of adjusted gross income respectively, compared to a median of 4.5 percent. * The deduction reduces the cost of state and local government expenditures, particularly in high-income areas, with lower-income states and regions subsidizing higher-income, higher-tax jurisdictions.

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