Nathan B. Hannah, attorney
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WILL STATES REALLY TRY TO UNDO THE EFFECT OF THE NEW LIMIT ON THE STATE AND LOCAL TAX DEDUCTION?

1/10/2018

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Are states really going to shift their personal tax levies from income taxes to payroll taxes just to preserve the unlimited deductibility of state and local taxes on their residents’ federal income tax returns?
You’d think that the new federal tax legislation had eliminated entirely the deduction for state and local taxes (“SALT, as the acronym mavens have dubbed it).  Remember, however, that isn’t what happened.  All the federal tax legislation did was limit the state and local tax deduction to $10,000 per year.  As I have alluded to previously, my hunch is that there aren’t all that many taxpayers who pay more than $10,000 in state and local taxes and have more than $24,000 in itemized deductions.  You have to have more than $24,000 in itemized deductions to benefit from the state and local tax deduction.  Those who do fit that profile are probably owners of expensive houses with big mortgages in high-tax localities.  
I could be wrong, but I doubt that there’s a big enough constituency for a shift to payroll taxes that the idea will go anywhere, all the pontificating by politicians and academics notwithstanding. 
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