State Legislators Urge Congress – Reduce Tax Rates for All Taxpayers by Eliminating Unproductive SALT Deduction

In a show of unity from across the nation, state legislators from 37 states signed a letter by the American Legislative Exchange Council (ALEC) to Congress urging the elimination of state and local tax (SALT) deductions and passage of real tax reform. The state legislators represent millions of constituents from all corners of the country, including high-tax states such as Maryland, Pennsylvania and Minnesota. The letter to Congress states:

Dear Member of Congress:

States desperately need a return to robust national economic growth in addition to fiscal discipline on the spending side of the ledger. Eliminating the state and local tax (SALT) deduction would provide upwards of $1.5 trillion over the next decade to implement broad-based tax cuts nationally. This overhaul would spur the growth in economic output needed to jolt business investment, personal income growth, and job growth.

In addition to being a roadblock to broad federal tax reforms, the SALT deduction partially shifts the costs of mismanagement elsewhere. Thanks to SALT, income earners and businesses in lower-taxed states pay a higher effective federal income tax rate than their high-taxed counterparts since they deduct less from their taxable income. In effect, citizens in more fiscally responsible regions subsidize the malfeasance of politicians thousands of miles away.

Adding to the innate unfairness of the current SALT deduction, only a small fraction of those paying state and local taxes realize any federal tax benefit from the deduction. Only 30 percent of tax filers itemize at all for the simple fact that individuals must choose between the “standard deduction” of either $6,300 or the total of all other allowable deductions. In other words, all workers pay state and local taxes; but only the minority of workers who itemize deductions see a partial “refund” of those taxes paid. A far lower percentage of middle-class workers itemize compared to their higher-earning counterparts. As a result, the SALT deduction operates very similarly to a regressive tax by rebating a relatively higher portion of state and local taxes as one earns more income. Lowering the tax rates on all by eliminating the SALT deduction will benefit all Americans—wealthy and poor alike—by incentivizing the investments in business enterprises and technology needed to accelerate national economic growth.

For many taxpayers outside of the high-tax locales, the savings from lower federal rates will outweigh the loss of the federal deduction even without positive changes at the state and local level. Abolishing SALT would force residents to take a much harder look at their state and local tax rates. Especially in the highest taxed states, the loss of the deduction will increase community demands for more responsible management of government resources. But even taxpayers in high-tax areas disproportionately benefiting from the existing SALT deduction will benefit from its elimination. The larger tax base resulting from accelerated growth will alleviate some of the impetus for higher state and local rates.

The hardworking men and women of America need pro-growth tax reform to ensure a healthy economy in the months and years ahead. Incentivizing investment and business expansion by lowering the penalty on success (the income tax) produces far more growth than subsidizing state and local government spending through the SALT deduction. For these reasons, we support efforts to eliminate the state and local income tax deduction in exchange for lower federal income tax rates across the board.

The state legislators listed below come from all regions of the country and represent millions of people.

Alabama

Representative Jack Williams

 Arizona

Senate President Steve Yarbrough

 

Senator Sylvia Allen

Senator John Kavanagh

Senator Debbie Lesko

Senator Warren Petersen

Representative Benjamin Toma

Representative Mark Finchem

Representative Vince Leach

Councilman Sal DiCiccio, Phoenix

Arkansas

Representative Karilyn Brown

 Colorado

Senator Kevin Lundberg

Representative Susan Beckman

Representative Lori Saine

Representative Dave Williams

Connecticut

Representative John Piscopo

 Florida

Representative Ralph Massullo

Representative Mike Hill

Representative Neil Combee

 Georgia

Representative Matt Dollar

Representative Bruce Williamson

Hawaii

Representative Gene Ward

Idaho

Senator Steve Vick

Representative Eric Redman

Representative Jeff Thompson

 Indiana

Senator Brandt Hershman

Senator Mike Young

Senator Jim Buck

Senator Mark Messmer

Senator Luke Kenley

Representative David Wolkins

Representative Sean Eberhart

Representative David Frizzell

Representative Mike Speedy

Representative Woody Burton

Representative Heath VanNatter

Representative Gregory Steuerwald

Councilman Brian Jessen

Councilman Fred Glynn

Iowa

Representative Rob Taylor 

 Kansas

Senator Mary Pilcher-Cook

Senator Ty Masterson

Senator Gene Suellentrop

Representative John Barker

 Kentucky

Senator Ernie Harris

Representative C. Wesley Morgan

 Maine

Senator Andre Cushing

Representative Trey Stewart

Representative Matthew Harrington

Representative Nathan Wadsworth

Maryland

Senator Robert Cassilly

Senator Gail Bates

Delegate Ric Metzgar

Delegate Susan Krebs

 Michigan

Senator Phil Pavlov

Representative Michael Webber

Representative Tim Kelly

 Minnesota

Senator Mary Kiffmeyer

Senator Roger Chamberlain

Representative Sondra Erickson

Representative Cindy Pugh

Representative Pat Garofalo

 Mississippi

Senator Josh Harkins

Speaker Phil Gunn

 Missouri

Senator Wayne Wallingford

Senator Ed Emery

Representative Donna Lichtenegger

Representative Charlie Davis

Representative Cody Smith

Representative Kurt Bahr

Representative Justin Hill

Representative Keith Frederick

Representative T.J. Berry

Representative Bruce DeGroot

Representative Nick Schroer

Representative Scott Fitzpatrick

Representative Jered Taylor

 Montana

Senator Roger Webb

Nebraska

Senator John Lowe

Senator Jim Smith

New Hampshire

Senator Gary Daniels

Representative Jesse Edwards

Representative Ken Weyler

 New Mexico

Representative Yvette Herrell

North Carolina

Representative Jason Saine

 North Dakota

Representative Craig Headland

Representative Karen Rohr

 Ohio

Senator Lou Terhar

Senator Bill Coley

Speaker Cliff Rosenberger

Representative Gary Scherer

Representative Tom Brinkman

Representative Andrew Brenner

Representative Andy Thompson

Representative Wes Goodman

Representative Bill Seitz

Representative Ronald Young

Representative Wes Retherford

Councilman Ethan Reynolds

 Oklahoma

Representative Kevin Calvey

 Pennsylvania

Senator Richard Alloway

Representative Brian Ellis

Representative Eric Nelson

Representative Seth Grove

Representative Stan Saylor

 South Carolina

Representative Garry Smith

Representative Alan Clemmons

 South Dakota

Representative John Mills

Representative Taffy Howard

Representative Hal Wick

Representative Tim Goodwin

Senator Jim Stalzer

 Tennessee

Senator Brian Kelsey

Senator Bill Ketron

Representative Martin Daniel

Representative Dan Howell

 Texas

Representative Ron Simmons

Representative Kevin Roberts

Representative Rick Miller

Collin County Judge Keith Self

 Utah

Senate President Wayne Niederhauser

Senator J. Stewart Adams

Representative Brian Greene

 Virginia

Speaker Bill Howell 

Delegate Kathy Byron

Councilman Jon Russell

West Virginia

Delegate Kelli Sobonya

Delegate Eric Householder

Delegate Gary Howell

Wisconsin

Senator Leah Vukmir

Senator Alberta Darling

Senator Devin LeMahieu

Representative John Nygren

Representative John Macco

Representative Mike Kuglitsch

 Wyoming

Senator Jeff Wasserberger

Representative Dan Laursen

Representative Donald Burkhart

Representative Timothy Hallinan

Representative Danny Eyre

Councilman Dicky Shanor