[mcherm]

Whether or not a state and local tax deduction counts as "double taxation" depends entirely on what you mean by "double taxation".

For example, one could say that sales tax is a form of "double taxation" because you were already charged tax on your income and now you are being charged tax again when you try to spend it. Or, one could say that income tax and sales tax are two unrelated taxes, and they should not be considered "double taxation".

In the case of the SALT deduction, it depends on whether you think that states (and local governments) taxing your income is a separate tax from the federal government taxing your income, or whether you think that they overlap and should count as "double taxation".

But mostly it just depends on whether you think it benefits your political party or the other political party.

[stopping]

Sales tax is indeed double taxation. That's why you're allowed to deduct it on your federal taxes under the SALT rules.

[rsj_hn]

> Sales tax is indeed double taxation.

Yes!

> That's why you're allowed to deduct it

It's complicated.

First, Sales taxes cannot be deducted from SALT if you deduct state income tax. You have to pick which one you deduct. But if the intention was to avoid double taxation, they would have allowed you to deduct both.

Second, SALT exists from the era when top marginal rates were 90 percent, so you could end up in situation where you paid more than your income in taxes. Actually this is true even with the SALT deduction, but the deduction was basically a tax break to top earners in order to compensate for very high federal rates. The rationale for it doesn't exist today.

Third, double taxation does not refer to the amount of tax paid but to the fact that the same income is taxed twice. Deducting the sales tax (or the income tax) would not eliminate double taxation, it would only reduce it by a small amount.

E.g. if you earn $1 in income and spend half of it, and if the sales tax is 10% and state income tax is 10% and the Fed tax is 30%, then:

* Without SALT, your liability is 45 cents (thank God you only spent half!) and you have triple taxation on $.50 (sales, state, federal) and double taxation on $.50 (state, federal)

* With SALT, your liability is 42 cents and there is triple taxation on $.50 (sales, state, federal) and double taxation on $.40 (state, federal). Thus the SALT deduction saves you 3 cents by reducing your federal liability from 30 cents to 27 cents. But you paid 15 cents to the state. This is because the SALT deduction is not a tax credit, it's a tax deduction that just reduces your taxable income a bit.

[_3u10]

This. I’m a huge fan of tax cuts but the double taxation thing never made any sense to me. But then I realized it resonated with a lot of people so I just went with it. In todays society if someone favors reducing taxes it’s wise to just roll with it.

One of the biggest advantages to deriving revenue from taxation is that if you tax everyone 10% by the time the money changes hands 10 times you’ve got your dollar back. It’s all double taxation