Fiscal Federalism by the Numbers

Fiscal Federalism by the Numbers

Federal and state finances intersect in a number of ways. Showing how closely they are intertwined helps enhance policymakers' understanding of the federal-state relationship.

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Cap on the State and Local Tax Deduction Likely to Affect All States

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The tax law passed by Congress in 2017 placed a $10,000 cap on the state and local tax (SALT) deduction, which allows filers who itemize to subtract state and local property and sales or income taxes from their federal taxable income. Policymakers across the country are examining this new cap’s potential impact on states, but much of that attention has concentrated on a handful of coastal states with large urban centers, such as New York and California. However, IRS data for tax year 2015 reveal two key facts about the deduction—the variety of states with average claims above the cap and the difference in states’ claim rates (the percentage of filers who claimed the deduction)—which together suggest this focus may be too narrow.

U.S. Army National Guard Private
U.S. Army National Guard Private
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Wide Variation in Federal Defense Spending From State to State

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The U.S. government spends defense dollars in every state through purchases of military equipment, wages for service members and civilians, pension payments, health care services, and grants to states. But the size and mix of those investments varies substantially across the states, so changes in defense spending will affect them differently, and the impacts will depend on which programs and operations are increased or cut. This analysis of defense spending in the states takes a comprehensive look beyond contracts and salaries to include retirement payments, nonretirement benefits, and grants.

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