> 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.