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Research Project

Estimating The Impact Of The Cap On SALT Deductions (2021), by Yonghong Wu

Research Area(s)
Government Finance Research
Tax Policy and Administration


The article, Estimating The Impact Of The Cap On SALT Deductions: A Cross-City Analysis Of Illinois, by Yonghong Wu, a GFRC faculty affiliate, published in the Winter 2020 issue of the Illinois Municipal Policy Journal compares SALT caps in Illinois municipalities. The Tax Cuts and Jobs Act of 2017 limits individual deductions for certain state and local taxes (SALT) to $10,000 per year. Using the Internal Revenue Service’s 2017 Statistics of Income data, this research estimates the impact of the cap on SALT deductions across municipalities in the State of Illinois. The results indicate that municipalities with higher incomes and heavier property tax burdens will be hit harder because the magnitude of the impact rises with median household income and municipal property tax level. Municipal governments may reduce their reliance on deductible local taxes and incorporate other alternate revenue sources to mitigate the impact. Published: February 2021 Publisher: Illinois Municipal League View the full report here