Here’s a question: if Democrats want “Medicare for all,” much increased college tuition support, and a “Green New Deal,” how can they possibly backtrack on the mild tax hike that President Trump’s tax bill imposed on wealthy citizens in blue states?
I’m referring to the reduced state and local tax deduction caps under the 2017 Republican tax reform legislation. The SALT deduction, as it is known, forced federal income taxpayers in states such as Florida and Tennessee, which don’t have state income taxes, to pay proportionally more to the federal government than residents of states with high income taxes. That was wrong. By capping the deduction and lowering rates for everyone, Trump’s tax bill made the system fairer, reducing taxes overall while eliminating a massive loophole for very wealthy individuals in high-tax states.
But I find it amusing, as CNBC notes, Democrats from high state income tax California, New Jersey, New York, and Illinois are working to increase the SALT caps. In other words, Democrats are now working urgently to cut tax bills for high-earners in Westchester, N.Y., Lake, III., and Los Angeles, Calif., counties.
This is hilarious. After all, if Democrats are unable to persuade high-earners in their own states that they should pay the same proportional amount of federal income taxes as other high-earners in other states, they will surely struggle to persuade those same individuals to pay thru-the-roof income taxes under a future Democratic administration so that we can afford “Medicare for all.”
But that’s exactly what the new Democratic consensus requires. “Medicare for all,” free college tuition, a $93 trillion “Green New Deal,” and other Democratic pet projects will require multiple trillions of dollars in new spending. The rich cannot pay for it all, in either moral or mathematical terms, but the SALT caps illustrate Democrats’ great problem. Namely, that capital has never been more mobile, and it tends to evacuate states that Democrats control for long periods.
