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Apolitical SALT-free Tax Equilibria

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  • Kolpin, Van

Abstract

A decades old debate regarding the state and local tax (SALT) deduction component of federal tax policy has received renewed attention in light of the Tax Cuts and Jobs Act of 2017. Some have argued that greater economic efficiency is induced when such deductions are abolished. We examine the equilibrium implications of embracing a SALT-free doctrine in which SALT deductions are explicitly prohibited from federal tax code. We find that in the apolitical context of coherent welfare optimization, SALT-free doctrine will decrease, not increase, economic efficiency. Moreover, the presence of SALT deductions can facilitate maximization of federal welfare and relax equilibrium tax burdens on a nation’s citizenry.

Suggested Citation

  • Kolpin, Van, 2019. "Apolitical SALT-free Tax Equilibria," Mathematical Social Sciences, Elsevier, vol. 101(C), pages 99-103.
    • Handle: RePEc:eee:matsoc:v:101:y:2019:i:c:p:99-103
    DOI: 10.1016/j.mathsocsci.2019.07.003
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