The Tax Cuts and Jobs Act, H.R. 1, would eliminate the federal income tax deduction for nonbusiness state and local taxes while maintaining the deduction for business state and local taxes. That disparate treatment has generated a storm of negative commentary. In this short essay, I consider whether the federal tax law should allow a deduction for business state and local taxes assuming that there is no deduction for nonbusiness state and local taxes. I argue that investors and businesses, including pass-through businesses, should be allowed to deduct state and local property and sales taxes, but not general income taxes.
Tax law and policy, law and economics, SALT deduction, real & personal property taxes, wage and general income taxes, public benefits
Knoll, Michael S., "On the Disparate Treatment of Business and Personal SALT Payments" (2018). Faculty Scholarship at Penn Carey Law. 1960.
Economic Policy Commons, Law and Economics Commons, Policy Design, Analysis, and Evaluation Commons, Public Economics Commons, Taxation Commons, Taxation-Federal Commons, Taxation-State and Local Commons