You will recall that just after the election I move was a foot to remove the ability of high tax blue States like New York Massachusetts California and New Jersey, to write off those High tax bills to the federal government and therefore spreads those taxes to the remainder of the country.
I approved at the time, saying in part:
Think..the majority of the people complaining are in high tax states such as New York New Jersey Pennsylvania California Oregon and so on. In other words, democrat-run States. These states have been subsidized by the rest of the country for generations now because they were able to write off their state taxes. Now, with this new tax bill, they won’t be able to do that anymore.
Now Ponder this. For all of the screeching about tax the rich, what this comes down to is the higher-income people’s in those States who find themselves unable to write off their state-level taxes to the federal government and there for the rest of the country are the ones that are hit the hardest and the ones that are currently screeching the loudest.
Apparently they don’t want to tax the rich after all.
Democrat politicians aren’t happy with, for two reasons. First to forestall rioting they’re going to have to start cutting back on their lavish spending. And they really don’t want to tax the rich anyway because that’s where the Democrat donors are.
About a month later I added;
For the record, I view removing the write- off from the state taxes to be a very positive thing. Unmask the amount of spending that the state is doing, by insisting that the people pay for those High tax states upfront. Good.
I figure the spending will end up being cut rather dramatically when there’s a few hundred thousand torches around the State houses in democrat-run states. Such things have a tendency of focusing the attention. And I’m afraid that little else will.
Turns out there’s another effect that I probably should have made mention of at the time, and it comes from a Bloomberg article, [1] released about the same time I made my original comments. (
Many analysts say the U.S. is a low-tax country, mostly on the idea that taxes paid as a percentage of gross domestic product are lower than most other developed economies. But whether the U.S. is a low- or high-tax country is a matter of perspective, and depends a lot on your income, as the tax code is steeply progressive. With a top federal rate of 39.6 percent, plus a state income tax of 9 percent to 13 percent, plus property taxes — which are no longer fully deductible — the tax burden for high earners approaches Scandinavia, where tax rates are in the high 50 percent range.
People used to complain about high taxes before, but for the most part, they tolerated them. I suspect that now they are going to do something about itbecause capping the deductibility of state and local taxes (SALT, as it is known) has the potential to result in a population migration so large that it would result in profound economic and social changes. For starters, the South could become home to some of the nation’s largest cities. Many businesses will flee high-tax states in favor of low-tax states. This has been happening for years, but SALT will accelerate the trend.
Of bigger concern is how the leadership of high-tax states will respond. If individuals and businesses leave, eroding the tax base, states will face a choice between cutting spending or raising taxes. Less spending is hard with existing pension obligations, so there’s a strong possibility that a state like New York or Connecticut could enter a “death spiral” where residents leave, the state raises taxes, more leave, and so on. Since the governments of the high-tax states are nearly all Democratic, I doubt many have the desire to cut services when faced with net migration out of the state.
Well, if that happens then the responsibility Falls to those of us on the right to explain to those people fleeing those higher taxes exactly what was that caused them and that they shouldn’t bring those policies to the States they’re fleeing to.