The existing limit on state and local tax deductions for itemizers is inequitable. It leads to businesses and workers relocating from districts where the cost of living is increased due to the distortionary SALT cap. This is not what Adam Smith had in mind. The greatest economist of all time would likely suggest keeping the cap but adjusting each district’s standard deduction based on its cost of living.
Start with a base of $30,000 for the 2025 tax year and adjust it annually for national CPI increases. But make geographical, not just temporal, adjustments according to differences in the cost of living among different parts of the country. Residents in New York metro area congressional districts would receive twice the annual amount, $60,000, that taxpayers get in the average district. Residents of Des Moines would receive approximately 10 percent less than the specified amount of $30,000.
It’s really very simple. Use a table like that provided by The Council for Community and Economic Research (C2ER) Cost of Living Index (COLI). Taxpayers in each Congressional district can be identified via https://www.coli.org. Ensure no tax increase for any taxpayer in the first year, and then gradually adjust the amount each year to achieve a fair and efficient system for everyone. If still deemed unfair, use some of the increased tax revenues to balance it out. //
Mike Ford
5 hours ago
What you pay in federal taxes should not be determined by where you live.
anon-pmcw
5 hours ago edited
How to fix the SALT tax cap? Eliminate it. State and local taxes should be paid by people in those jurisdictions, not shoved off onto the rest of the country via letting those people pay less federal taxes. //
Wbcoleman
5 hours ago
This is crazy. The SALT deduction is a subsidy to the taxing state. This proposal gives every state a direct incentive to raise taxes.
