In late 2017 the Tax Cuts and Jobs Act (P.L. 115-97) was passed into law. Controversy instantly ensued. One major controversy revolves around the capping of the Internal Revenue Code section 164 state and local tax deduction at $10,000 per taxpayer (the SALT cap). Viewed by many blue states as an attack on their citizens, the SALT cap has spurred counterattacks in the form of state legislation designed to provide taxpayers with an avenue to counter the effects of the SALT cap (the SALT cap workarounds). While others have and are considering the effectiveness of the SALT cap workarounds, this essay explores a more basic question: do the states have the power to lob such counterattacks and facilitate taxpayers’ federal tax avoidance? The answer is more nuanced than it might first appear; unlike individual tax avoidance actions, the states’ actions raise the specter of federal preemption.
Hayes R. Holderness, The Case for Preempting SALT Cap Workarounds, 89 St. Tax Notes 329 (2018).