[ NTA logo ]

Did the 2017 Tax Reform Discriminate against Blue-State Voters?

David Altig, Alan Auerbach, Patrick Higgins, Darryl Koehler, Laurence Kotlikoff, Ellyn Terry, and Victor Ye

Abstract:

The Tax Cuts and Jobs Act of 2017 (TCJA) significantly changed federal income taxation, including limiting SALT (state and local property, income, and sales taxes) deductibility to $10,000. We estimate the TCJA’s differential effect on red- and blue-state taxpayers and the SALT limitation’s contribution to this differential. We find an average increase in remaining lifetime spending of 1.6 percent in red states versus 1.3 percent in blue states. Among the richest 10 percent of households, red states enjoyed a 2 percent increase compared to 1.2 percent in blue states, with the gap driven almost entirely by the SALT deduction limitation.

Citation

David Altig, Alan Auerbach, Patrick Higgins, Darryl Koehler, Laurence Kotlikoff, Ellyn Terry, and Victor Ye (2020), Did the 2017 Tax Reform Discriminate against Blue-State Voters? , National Tax Journal, 73:4, pp. 1087-1108

DOI: dx.doi.org/10.17310/ntj.2020.4.08