> Even if the tax is progressive and not related to consumption, why should the federal government foot the bill?

The federal government is no more footing the bill through deductibility than it is footing the cost of capital acquisition by taxing net gains rather than gross revenue of capital sales; it just isn't taxing the investments state taxpayers make in common facilities which enable their earnings. Mm which is actually the only reason for the SALT deduction, which still exists. It just now had a nonsensical limit that has no basis besides punishing political revenues and promoting low tax policy regardless of efficiency.

> The federal government is no more footing the bill through deductibility than it is footing the cost of capital acquisition by taxing net gains rather than gross revenue of capital sales; it just isn't taxing the investments state taxpayers make in common facilities which enable their earnings.

There's a difference. In the case of taxing net gains rather than gross revenue on capital sales, every citizen is represented in this decision. Not to mention, the consequential incentive is to increase investment in businesses that create taxable earnings. In the case of the SALT deduction, the consequential incentive is to increase state and local taxes to fund social programs over which only that state's citizens have representation.

The fact that this is skewed a bit to favor those who paid in based on their state of origin I am certainly ok with. The state had a strong hand in creating the business environment for people to thrive in such a way that they could become wealthy to begin with.

So I'm okay if some federal dollars have to be shaved off so states can take care of themselves. I do not believe there is an endless incentive for states to raise taxes at the expense of the federal government.