> 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.