Despite controlling the executive branch and both chambers of Congress, Republicans can’t seem to get anything done on many policies they have railed about for years. In fact, the only thing they appear to agree on regarding tax reform is a shared desire to go after blue states and cities.
A Wall Street Journal report about the GOP’s inability to get it together on tax reform opens with a stark assertion: “The boldest ideas for changing the nation’s tax code are either dead or on political life support.”
But the article also has one point that should concern millions of Americans:
The only big revenue-raising provision with anything close to Republican consensus is repealing the deduction for state and local taxes, and that idea faces objections from blue-state lawmakers in the party.
In other words, Republicans are gunning for people in blue states.
Treasury Secretary Steve Mnuchin previously hinted at such a strategy in April, justifying the proposal by saying, “We want to get the federal government out of the business of what’s the states’ business.”
But the GOP’s notion of keeping the federal government out of “states’ business” betrays some notable cognitive dissonance.
Republicans want to pay for tax cuts for the rich by making voters in big, left-leaning cities cough up more money. According to the Tax Policy Center, the states that would be hit the hardest by this change would be New York, Connecticut, New Jersey, California, Massachusetts, Maryland, and Illinois.
There is a common misconception that Democratic voters in states such as those seven are the major recipients of welfare — both personally and in terms of state subsidization by the federal government. But this could not be further from the truth.
And putting aside the irony of Republicans claiming to be the party of small government and self-reliance, blue state taxpayers consistently vote for creating a social safety net shared across America, and pay an outsized amount in return.
According to The Tax Foundation, a nonpartisan organization, nine out of the top ten recipients of federal aid, in terms of percentage of revenue, went for Donald Trump in 2016, with Mississippi (42.9 percent) and Louisiana (41.9 percent) leading the pack. This also extends to how much money those states’ citizens get back: In Mississippi, residents receive $2.34 for every dollar paid in federal income tax, whereas residents in blue states like Delaware, Minnesota, and Illinois get well under a dollar.
Currently, the states with the highest tax burdens are New York, Hawaii, Vermont, Maine, Minnesota, Connecticut, New Jersey, Rhode Island, Illinois, and California — states which Hillary Clinton won in the presidential election (with the exception of Maine, which split its electoral votes).
In a state like New York, residents pay large sums to the government due to federal, state, and local income taxes and capital gains taxes levied on them. (Contrast this with South Dakota, which has no income taxes or corporate taxes save for a bank franchise tax.) The only relief these city dwellers get is the ability to subtract their state levies from federal taxable income — something Trump’s “budget plan” proposes to repeal.
There is a solid argument to be made that letting billionaires in New York City deduct these state taxes is unfair, but as the Wall Street Journal notes, “High-income households subject to the alternative tax already can’t take the state tax deduction.”
And throwing out the entire concept would be “devastating for middle-class families in New York and elsewhere,” Senator Chuck Schumer said in April. Red parts of blue cities would suffer as well, as Rep. Dan Donovan of Staten Island, NY, pointed out when he said losing the deduction would “crush” his constituents.
The tax cuts Trump is proposing in the health care repeal plan — and likely his budget, when fully fleshed out — benefit the richest among us while cutting funds to fight poverty and insure lower-income Americans. Wealthy Wall Streeters would be taken care of while the middle class of these urban centers would be hit hard, which is antithetical to what Trump promised during his campaign.
Trump’s hypocrisy on matters foreign and domestic is too broad to catalogue, but he seems to have gone out of his way to target the very people who put him in office, kowtowing to the Republican establishment he professed to dislike.
And if, as the WSJ stated, this is the only revenue-raising proposition on which the Republicans can manage to agree, then the Democrats have another cause to fight — another rallying cry to bring home, as “tax reform” talk gets underway in Washington.