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72 Tax L. Rev. 151 (2018-2019)
The Death and Life of the State and Local Tax Deduction

handle is hein.journals/taxlr72 and id is 167 raw text is: The Death and Life of the State and Local Tax Deduction DANIEL HEMEL* INTRODUCTION More than a century and a half after its birth, the federal income tax deduction for nonbusiness state and local taxes has shrunk to a shadow of its former self. While a series of legislative enactments over the past several decades had already chipped away at the deduction's scope, the 2017 Act struck the biggest blow to the deduction yet.' For the next seven years, only about a tenth of taxpayers will be able to derive any benefit from the deduction for state and local taxes (SALT).2 And those that still claim the SALT deduction will run into a $10,000 cap that in many cases will severely limit the benefit they can claim.3 But it would be premature to publish the SALT deduction's obitu- ary just yet. For one thing, the limits on the SALT deduction in the 2017 Act expire after December 31, 2025.4 The SALT deduction is not dead-it's just cryogenically frozen. More immediately, several states are seeking to enact laws that could resuscitate the provision at least in part. Some of those efforts may be stymied by regulations that Trea- sury and the Internal Revenue Service (IRS) plan to promulgate, but others will survive intact. States may even enact reforms that effec- tively expand the deduction's scope as compared to pre-2018 law. * Assistant Professor, University of Chicago Law School. Thanks to Michael Christ for excellent research assistance, to Mitchell Kane and Jeremy Bearer-Friend for thoughtful edits, and to participants in the National Tax Association 48th Annual Spring Symposium, the Boston College Law School Tax Policy Workshop Series, the Brigham Young University Law School Tax Policy Colloquium, the Stanford Law School Tax Policy Seminar, and the University of British Columbia Allard School of Law Tax Policy Workshop Speaker Series for insightful comments. Special thanks to Joseph Bankman, Jacob Goldin, David Kamin, Darien Shanske, and Kirk Stark for conversations that helped me formulate my thoughts on this subject. All errors are the author's. I Pub. L. No. 115-97, § 11042, 131 Stat. 2054, 2085-86 (2017). 2 See Tax Policy Ctr., Model Estimates, Distribution Tables by Dollar Income Class, tbl.T18-0001 (2018), https://www.taxpolicycenter.org/model-estimates/impact-itemized-de- ductions-tax-cuts-and-jobs-act-jan-2018/tl 8-0001-impact-number (estimating that only 10.9% of tax units will choose to itemize deductions under current law). 3 See IRC § 164(b)(6). 4 See IRC § 164(b)(6). 151

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