Taxes and Deduction Caps

New York thinks it’s found a way around the tax reform act that cut Federal income taxes and capped the deduction taxpayers can take for State and Local Taxes (vis., State income and property taxes).

The idea, which became law last month, creates a new optional payroll tax that shifts the state and local tax deduction from individuals who can no longer fully take it to businesses that can.


Employers are worried about compliance costs, interactions with union contracts, complexity across state lines, and the difficulty of explaining to workers how a plan that might lead to smaller pay raises still puts more money in their pockets.

In response,

The Wall Street Journal asked the 10 largest private employers in the state and in New York City, along with all Fortune 100 companies based in New York state, whether they would opt for the new payroll tax. None that responded said they would do so


Here’s an alternative idea; work with me on it, it’s simple and not very nuanced.  The State jurisdictions should simply lower their income and property tax rates.  That would bypass the SALT cap by making it less important (and as a happy side effect it would leave more money in the hands of the State’s citizens).

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