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1 Nicole Kaeding, Testimony before the House Ways and Means Select Revenue Measures Subcommittee 1 (2019)

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Testimony before the House Ways

and Means Select Revenue

Measures Subcommittee

June 25, 2019

Nicole Kaeding
Vice President of Federal and Special Projects


The Impacts of Limiting the State and Local Taxes Paid

Deduction

Chairman Thompson, Ranking Member Smith, and members of the Committee,
thank you for the opportunity to speak to you today regarding the recent changes
to the state and local taxes paid deduction and its impact on communities.

The Tax Foundation is the nation's oldest organization dedicated to promoting
economically sound tax policy at the federal, state, local, and global levels of
government. We are a nonpartisan 501(c)(3) organization.

For more than 80 years, the Tax Foundation's research has been guided by the
principles of sound tax policy. Taxes should be neutral to economic decision-making,
and they should be simple, transparent, and stable.

Today, I have been asked to discuss the recent changes made to the state and local
taxes (SALT) paid deduction within Public Law 115-97, known informally as the Tax
Cuts and Jobs Act (TCJA).



The SALT Deduction Prior to Reform

Since the creation of the federal income tax in 1913, the federal government has
allowed individuals to deduct taxes paid to state and local governments.' Prior to
the TCJA, taxpayers could deduct their income or sales tax liabilities, plus their
property taxes paid. For most taxpayers, they deducted their income and property
taxes. Residents of no-income-tax states would instead deduct their sales taxes
paid.


1  Jared Walczak, The State and Local Tax Deduction: A Primer, Tax Foundation Fiscal Fact No. 545, Mar. 15, 2017, https://
   taxfoundation.org/state- and-local-tax-deduction-primer/.

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