Which Places Benefit Most From State and Local Tax Deductions?

by Alan Cole, Tax Foundation, April 27, 2017 

One of the most substantial changes in President Trump’s most recent tax plan is the elimination of many itemized deductions, including those for state and local taxes. This map shows the variation, by county, in the amounts of these deductions. The measurement used here is mean deduction amount taken per return: in other words, the total of all of the deductions for state and local taxes, divided by number of returns filed. The results show that the benefits of these deductions vary substantially from county to county.

This map is interactive—hover the mouse over a given county to find out its average amount of state and local deduction claimed. Click here for a larger version.

There are two factors contributing to this regional variation. The first is that higher-income taxpayers tend to take larger deductions. People with very high incomes tend to have very high levels of sub-federal taxes paid, and furthermore, they’re more likely to itemize generally. Lower-income taxpayers tend to opt for the standard deduction instead. Consequently, the itemized deductions in this map are most valuable in counties where incomes are high.

The second factor for county-by-county variation is that state and local tax regimes differ substantially. The places that benefit most from this federal deduction tend to have high state and local taxes overall. The border becomes clearly noticeable between California and Nevada, for example, simply by looking at data from federal tax returns. The ten counties benefiting most from these deductions are all located in four states—ones that, like California, are known to have high tax burdens generally:

Top Ten Counties for State and Local Deductions (2014)

Source: IRS SOI Tax Stats – County Data

• New York County, NY $24,898
• Marin County, CA $16,956
• San Mateo County, CA $15,405
• Westchester County, NY  $14,784
• Fairfield County, CT  $14,262
• Santa Clara County, CA  $12,562
• San Francisco County, CA  $12,116
• Nassau County, NY  $11,624
• Morris County, NJ  $11,440
• Somerset County, NJ  $11,267

Hawaii

• Honolulu County $2,705
• Maui County  $2,364
• Kauai County $2,334
• Hawaii County $2,101

It is unclear which kinds of taxpayers would see their tax bills increase or decrease as a result of the president’s plan. There are many tax cuts in the plan, some of them for the same kind of wealthy filers these deductions typically benefit. However, it is clear that the distribution of this particular tax change would vary with geography.