Trump will test Democrats’ tax patriotism: Glenn Reynolds

President’s plan would make high-tax blue states pay their fair share.

Democrats have been saying for years that we need tax increases, and that paying taxes is one of the greatest forms of patriotism. Now it looks like President Trump is going to put their beliefs to the test.

Trump’s new tax plan would hit blue states hardest, by eliminating the federal deductibility of state income and property taxes. That’s going to make it harder for blue states to maintain the high tax rates they’ve traditionally levied.

Right now, if you pay state property or income taxes, you can deduct them against your federal income taxes. In effect, it means that if you’re in a high federal bracket, your state taxes may be offset by that federal deduction to the tune of 40% or more.

End the federal deduction, though, and high state taxes come straight out of taxpayers’ pockets with no offset.  As economist Nicole Kaeding told The Hill, by allowing deductions for state taxes, “the federal government is essentially subsidizing high tax rates in states like California and New York.”

The National Journal’s Ronald Brownstein calls this “an offensive against blue states,” but as Brad Todd replied on Twitter, “I think what you mean is it ends imbalanced federal subsidy for big government at the local level.”

I think that’s right. States should be able to set their own levels of taxing and spending, but I see no reason why a Walmart cashier in Tennessee (which has no state income tax and low property taxes) should be subsidizing a hedge fund mogul in New York or a studio executive in Hollywood. It’s fine if blue states want to have higher state and local tax rates, as they do, but they shouldn’t be encouraged to do so by federal tax giveaways. And it’s the urban, coastal areas that have done best over the past 25 years, so it seems time for them to pay their fair share now….

Source: Trump will test Democrats’ tax patriotism: Glenn Reynolds

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