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Resolutions & Amendments

Other International Executive Board Resolutions

Preserving the deductability of state and local taxes and the tax exemption for employer-paid fringe benefits

International Executive Board, 1985


Ever since the Federal income tax was established in 1913, Congress has allowed individual taxpayers to deduct all their major state and local taxes in order to avoid requiring people to pay a double tax on their incomes; and,


Deductibility makes it more likely that state and local governments will have an adequate base to fund public services because:

  1. Taxpayers who deduct their state and local taxes are less likely to oppose those taxes since deductibility reduces the net cost of these taxes to them. As a result, deductibility has been helpful in passing necessary tax increases and in defeating tax revolt initiatives.
  2. Deductibility has helped some jurisdictions to provide more public services than surrounding jurisdictions without the fear that some of their residents will migrate out of the state or city to avoid additional taxes; and


By helping state and local governments to raise adequate revenues, deductability contributes to the fiscal stability they need to fulfill their responsibilities within our Federal system of government; and


Under our current tax system a number of employer-provided fringe benefits are not treated as taxable income of the employee receiving them. Among the most important of these are employer-provided health insurance, child care, group term life insurance, education benefits, and group legal plans. In addition, the deferral of taxation on employer-paid pension contributions and the earnings on them provides a significant tax benefit; and,


The current tax treatment of employer-provided fringe benefits provides a significant incentive for employers to provide them as a form of employee compensation. Without this provision, employers would have to pay higher wages to enable employees to buy equivalent benefits out of after-tax earnings. Employees would receive fewer benefits both because they might choose not to buy them (for example, by gambling that no one in their family would get sick), and because equivalent benefits would become more costly as economies of scale inherent in group benefit plans would be lost. With fewer benefits being provided in the private sector, an already over-burdened public sector would be confronted with an unpleasant choice: either provide a government equivalent of these benefit programs to fill the gap, or accept more elderly people living in poverty, more patients without health insurance showing up in public hospital emergency rooms, and more parents forced to stay on public assistance because day care is unavailable.


That AFSCME will vigorously oppose any attempt to eliminate the deductability of state and local taxes; and,


That AFSCME will vigorously oppose any attempt to eliminate the current tax-exempt status of employer-provided fringe benefits.