As usual with laws, it's all politics. One piece of the puzzle is the Tax Reform Act of 1986. Another piece is what livesoft mentioned about sales tax becoming deductible again.ray.james wrote:Why does federal law allow tax deduction on sales/state/property taxes? What is the reason behind it.
Before the Tax Reform Act of 1986, taxpayers were able to deduct both state income and sales taxes when filling out their federal returns. President Ronald Reagan and the Treasury Department tried to change that.
livesoft wrote:It wasn't too many years ago that only state income taxes were deductible and not sales taxes. Folks in states without state income taxes felt they were being short-changed, so they got their reps to change the law so that they could deduct sales taxes. So the law used to be discriminatory, but is less discriminatory I think as it is now. If one could deduct BOTH state income tax AND sales taxes, then it would go back to being discriminatory against folks without a state income tax, wouldn't it?
DieselEngineer wrote:As a NH resident, I feel doubly discriminated against.
livesoft wrote:It wasn't too many years ago that only state income taxes were deductible and not sales taxes.
etarini wrote:livesoft wrote:It wasn't too many years ago that only state income taxes were deductible and not sales taxes.
What's deductible seems to come and go, as fashions (and constituencies) change.
I remember when CREDIT CARD INTEREST and CAR LOAN INTEREST were deductible, which today would get a "Wait, what?" reaction.
(Deduction of personal interest was eliminated when Ronald Reagan signed the Tax Reform Act of 1986, which also increased the tax on capital gains from 20% to 28%., while lowering the maximum 50% rate to 28% for ordinary income, equalizing taxes on different sources of income.)
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