Policy Documents

Case Study #4: The Deduction of State and Local Income Taxes or General Sales Taxes

Michael Schuyler and Stephen Entin –
August 1, 2013

The deduction of state and local income taxes or general sales taxes on federal returns is one of many tax expenditures being considered for elimination as part of a major tax reform effort in Congress. According to this study by the nonpartisan Tax Foundation, simply eliminating the deduction could harm the economy, but pairing such a policy with an across-the-board cut to income tax rates would produce strong employment growth, along with boosts to GDP and federal revenues.