How the Tax Bill Will Force States to Cut Medicaid: 50-State Data

The House and Senate tax plans propose reducing or eliminating taxpayers’ ability to deduct state and local taxes, including property and sales taxes, on their federal tax returns. This may sound like a dull issue that impacts only wealthier people, but it is a big deal for anyone who cares about Medicaid.

If the state and local tax deduction (“SALT deduction”) is eliminated or greatly reduced, it could spell big state Medicaid cuts. Here’s why the state and local tax deduction matters for Medicaid:

• States, counties, cities, and towns have the obligation to do a lot of things—staff schools, set up fire departments, purify water, and pay for the “non-federal” share of Medicaid, based on Medicaid’s long-standing shared financing between the federal government and states/localities.
• To do all these things, states, counties, cities, and towns need money. That money comes from taxes—and state and local taxes are critical to each state’s Medicaid funding.

This 50-state table shows how critical this revenue is for your state.