Question

How does SALT deduction allow states to raise tax collection without overburdening taxpayers?

Answer 1

SALT deduction is an exclusive feature of US taxation which allow states to raise tax collected without overburdening the tax payers.lt allows tax payers who itemize deductions on their federal income tax returns to deduct state and local real estate and property taxes, as well as income taxes or sales taxes.

SALT deduction helps to expand the tax revenue as follows.

* lt gives three levels two levels of government ( local and and state governments) with an increased ability to levy taxes.

* Governments are able to do so as a result of the decline in after- tax cost of state and local taxes to tax payers.

.* compared with other deductions, the State and local deduction has a larger impact than the deduction for both charitable giving and mortage interest.

If the SALT deductions were eliminated, assuming a 25 percent marginal rate, average tax Payer who currently itemizes tax would face an increase by almost 1800$ . So SALT deduction even helps in providing an incentive to pay taxes and to avoids tax evasion.