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Should some SALT deductions survive federal tax reform?

November 20, 2017
Picture of New York City and Rockefeller Center, NY, by Florian Giorgio via Unsplash.

Should some state and local tax deductions survive GOP proposals to eliminate the SALT deduction? In a new paper, Penn Law professor Michael Knoll argues that there should be a carve-out for property and sales taxes.


The Tax Cuts and Jobs Act, H.R. 1, would eliminate the federal income tax deduction for nonbusiness state and local taxes while maintaining the deduction for business state and local taxes. That disparate treatment has generated a storm of negative commentary. In this short essay, I consider whether the federal tax law should allow a deduction for business state and local taxes assuming that there is no deduction for nonbusiness state and local taxes. I argue that investors and businesses, including pass-through businesses, should be allowed to deduct state and local property and sales taxes, but not general income taxes.

More: Knoll, Michael S., “Not Too SALT-y: The Disparate Federal Income Tax Treatment of Business and Non-Business State and Local Taxes” (November 13, 2017). U of Penn, Inst for Law & Econ Research Paper No. 17-46.

Photo: Florian Giorgio.

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