ASA Opposes Limits to Deduct State and Local Taxes (SALT) Paid

ASA joined the Center for a Free Economy in a letter to congressional leadership to oppose any limits on the ability of businesses to deduct state and local taxes paid unless offset dollar for dollar by new and permanent pro-growth tax reforms. The ability of businesses to deduct state and local taxes (SALT) paid on their profits is a longstanding “ordinary and necessary expense” embedded in the U.S. tax code. Corporations have been able to deduct state corporate income tax paid for as long as such taxes have existed. "Pass-through" entities like Subchapter-S companies, partnerships, etc., were confirmed in their ability to deduct state and local profit taxes paid at the entity level in the 2017 “Tax Cuts and Jobs Act.” Businesses have always been able to deduct all other state and local taxes, such as property taxes and severance/extraction taxes.

Business taxes paid on business profits are fundamentally different from the individual SALT cap debate. Businesses deduct costs incurred for all ordinary and necessary expenses–rent, salaries, equipment, and state and local taxes. This has nothing to do with how much personal income tax, sales tax, and property tax an individual or family gets to deduct on their tax return. The two issues are only loosely connected because income taxes on businesses are apportioned based on where transactions take place, not where businesses are located. It’s vitally important that all the provisions of the 2017 Tax Cuts and Jobs Act be made permanent. ASA looks forward to working with the congressional leadership in the coming weeks to enact permanent, pro-growth tax reforms for American families and employers.