WASHINGTON - Ways and Means Committee Ranking Member Sander Levin (D-MI) today made the following statement regarding the deduction for state and local taxes, which some Republicans have targeted for elimination in order to dramatically lower tax rates for the highest earners.
LEVIN: “The deduction for state and local taxes was established so that taxpayers would avoid double taxation. The key question is what else Republicans support eliminating in their quest to dramatically lower tax rates for the very highest earners."
* The rationale for making State and local income taxes deductible was and remains the avoidance of double taxation. As stated in the legislative history to the Revenue Act of 1964:
“For state and local income taxes, continued deductibility represents an important means of accommodation when both the state and local governments on the one hand, and the federal government on other hand, tap the same revenue source -- sometimes to a significant degree. A failure to provide deductions in that case could mean an extremely heavy combined burden of state, local, and federal income taxes."
* The proposal to eliminate the deductibility of property taxes is particularly reckless as we emerge from a housing-led recession. Because the value of the deduction is generally understood to be capitalized into the price of housing, eliminating the deduction risks a widespread drop in housing prices, further damaging fragile markets.
