State and Local Legislators Urge Congress to Eliminate State and Local Tax Deduction in Exchange for Pro-Growth Lower Rates
FOR IMMEDIATE RELEASE
Contact: Alyssa Hackbarth: [email protected], (856)-649-8102
Arlington, VA – In a show of unity from across the nation, more than 100 American Legislative Exchange Council (ALEC) state legislators signed a letter to Congress urging the elimination of state and local tax (SALT) deduction and passage of real tax reform. The legislators from 35 states represent millions of constituents from all corners of the country, including high-tax states such as Maryland, Pennsylvania and Minnesota.
In an open letter to Congress, the state legislators write:
“Eliminating the state and local tax (SALT) deduction would provide upwards of $1.5 trillion over the next decade to implement broad-based tax cuts nationally. This overhaul would spur the growth in economic output needed to jolt business investment, personal income growth, and job growth.”
The ALEC letter from state legislators sends a strong message to their federal colleagues and makes the case for eliminating the SALT deduction. At a time when House Republicans are searching for ways to win support from both high-tax and low-tax states, ALEC state legislators seek to galvanize support and make sure those in Washington hear from the grassroots and recognize the benefits of eliminating the SALT deduction.
“For our state legislators, the fight to eliminate the state and local tax (SALT) deduction is an important battle to win if this country is serious about unleashing growth and simplifying the tax code,” said Lisa B. Nelson, CEO of the American Legislative Exchange Council. “Why should some states carry the burden of other states that live beyond their means?”
In addition to helping achieve historic tax cuts, another projected consequence of eliminating the SALT deduction is state tax reform. Because high-tax states will no longer be able to partially obscure the economic impact of steep rates, citizens will become more likely to demand fiscal reforms in state and local government.
ALEC letter to Congress excerpt:
“For many taxpayers outside of the high-tax locales, the savings from lower federal rates will outweigh the loss of the federal deduction even without positive changes at the state and local level. Abolishing state and local tax deduction would force residents to take a much harder look at their state and local tax rates.”
ALEC state legislators recognize the positive effects of federal tax cuts on states. “The best evidence of the positive effects of tax cuts comes from states like Indiana,” said 2017 ALEC National Chairman and Indiana State Senator Jim Buck. “By eliminating the state and local tax deduction, the resulting lower federal income tax rates will give residents of all states tax relief. My message to members of Congress from high-tax states: ‘Support the elimination of the state and local tax deduction. Your constituents will benefit from stronger state economic growth generated by lower federal taxes.”
Other ALEC state legislators look to Congress to fix an inequity in tax policy that currently favors high-tax states. Doing away with the state and local tax deduction corrects a fundamental unfairness in the current tax structure. Jonathan Williams is ALEC Chief Economist and Vice President of its Center for State Fiscal Reform. “Thanks to the SALT deduction, income earners and businesses in lower-taxed states pay a higher effective federal income tax rate than their high-taxed counterparts since they deduct less from their taxable income. In effect, citizens in more fiscally responsible regions subsidize the malfeasance of politicians thousands of miles away.”
As Congress fills in the tax reform framework laid out by President Trump, there’s much at stake. Economists say the nation has already counted the promised tax cut and that coming up short could end “The Trump Boom.” Stephen Moore is an ALEC scholar and co-author of Rich States, Poor States. “Employers, investors, and workers are counting on Congress to deliver this economic stimulant before the end of the year. Eliminating the SALT deduction will help achieve that and lead to lower rates on businesses—20% for corporations and 25% for most small businesses. Chopping our corporate tax rate nearly in half would bring capital, jobs, and businesses back home to all states. What better way to shake the rust off the Rust Belt?”
With $1.5 trillion at stake over a decade, the fight over eliminating the state and local tax deduction is entering a crucial stage. “Eliminating the SALT deduction has been mischaracterized as a revenue grab,” says ALEC Center for State Fiscal Reform Director Joel Griffith. “Quite the contrary, elimination of the deduction in exchange for lower federal income tax rates is a revenue-neutral shift in tax policy. All residents—including the 30% of tax filers who itemize deductions on their tax returns— will benefit from the economic growth generated by lower federal income tax rates.”
The ALEC Letter to Congress goes on to say:
“The larger tax base resulting from accelerated growth will alleviate some of the impetus for higher state and local rates.”
ALEC LETTER TO CONGRESS HIGHLIGHTS:
• Eliminating the state and local tax (SALT) deduction would provide upwards of $1.5 trillion over the next decade to implement broad-based tax cuts nationally.
• Only 30% of tax filers itemize deductions. As such, the vast majority do not realize any federal tax benefit from the SALT deduction.
• Without the SALT deduction, residents will take a much harder look at their state and local tax rates.
• The hardworking men and women of America need pro-growth tax reform to ensure a healthy economy in the months and years ahead.
Read our op-ed in The Hill:
“Congress Eliminating State and Local Tax Deduction the Right Move for Big Growth”
The American Legislative Exchange Council is America’s largest organization of state legislators and are dedicated to the principles of limited government, free markets and federalism. ALEC members comprise nearly one-quarter of the country’s state legislators who represent more than 60 million Americans.