Michigan Proposes Tax Deduction Cap Workaround With Tax Increase

March 5, 2019, 8:50 PM

Michigan Gov. Gretchen Whitmer is proposing a federal tax deduction cap workaround for pass-through entities that also increases their state income taxes.

The trade off would simultaneously grant pass-through entities—such as limited liability companies and S corporations—a workaround to the recently enacted cap on the federal deduction for state and local taxes paid. It would raise state tax revenue by about $157 million in 2020 and $217 million in 2021, according to Whitmer’s (D) Mar. 5 budget proposal.

Whitmer’s proposal hitches to a push by pass-through entities seeking the unlimited SALT deduction that corporations have, which was capped at ...

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