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Assessing the Federal Deduction for State and Local Tax Payments

In: Economic Analysis of Tax Expenditures

Author

Listed:
  • Gilbert E. Metcalf

Abstract

This paper examines the distributional and behavioral impacts of ending the deductibility of state and local taxes against the federal individual income tax. I carry out a number of distributional analyses — considering both variation across income and across states — of the subsidy from deductibility as well as the distributional impact of potential partial reforms. I also consider how behavioral responses affect the distributional analysis. Using a large panel of data on state and local governments, I find that deductibility increases reliance on deductible taxes and increases state and local spending out of own-source revenue.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Gilbert E. Metcalf, 2008. "Assessing the Federal Deduction for State and Local Tax Payments," NBER Chapters, in: Economic Analysis of Tax Expenditures, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13143
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    Cited by:

    1. Federico Corredor, 2026. "Local Government Resilience to Federal Tax Reform: Evidence from the SALT Deduction Cap," Center for State and Local Finance Working Paper Series cslf2601, Andrew Young School of Policy Studies, Georgia State University.
    2. Christian A. L. Hilber & Tracy M. Turner, 2014. "The Mortgage Interest Deduction and its Impact on Homeownership Decisions," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 618-637, October.
    3. Howard Chernick & Jennifer Tennant, 2010. "Federal-State Tax Interactions in the United States and Canada," Publius: The Journal of Federalism, CSF Associates Inc., vol. 40(3), pages 508-533, Summer.
    4. John M. Foster, 2014. "Tax Exporting and the Business Share of Sales Tax Levies," Public Budgeting & Finance, Wiley Blackwell, vol. 34(4), pages 80-99, December.
    5. Ambrose, Brent W. & Valentin, Maxence, 2025. "Federal tax policy and the capitalization of local public goods," Regional Science and Urban Economics, Elsevier, vol. 114(C).
    6. John M. Foster & Jacob Fowles, 2016. "Easy Money: Tax Exporting and State Support for Higher Education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(2), pages 415-440, April.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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