As leaders in Congress move toward finalizing a huge tax cut proposal, taxpayers in Virginia are preparing to take a bigger hit than most states.
Most of the talk about eliminating or reducing the deduction for state and local taxes has been aimed at states like California and New York. But Virginia ranks 5th in terms of the percentage of tax filers who take advantage of this popular deduction. Chris Wodicka at the Commonwealth Institute says eliminating or reducing the state and local tax deduction would make it harder for states to maintain their own revenues.
“It would put a lot of pressure on state and local governments over time to reduce their own level of taxes and thereby reduce services for education or health care.”
Frank Shafroth at George Mason University says this idea was considered and abandoned during the Reagan administration.
“I think many members of Congress felt it was the equivalent of taxing a taxpayer twice, you were taxing them at the federal level on money they didn’t have because they had already paid it in terms of state and local taxes.”
The change would hit Northern Virginia particularly hard, especially Loudoun County and Fairfax County, where more than half of the tax filers take advantage of the deduction.