Politics, Government & Public Policy: April 2017 Archives
The biggest news from President Trump's tax proposal is the plan to eliminate the federal deduction for state income taxes. This would mean that you wouldn't get to subtract your state income tax from your income when calculating your federal income tax, and it would have the greatest effect on residents of high-tax states.
To offset the loss of revenue from lower tax rates and other changes, Cohn and Mnuchin said they were proposing to eliminate virtually all tax deductions that Americans claim, provisions that they argued primarily benefited wealthier Americans. Cohn said they would preserve tax breaks for mortgage interest, retirement savings and charitable giving. But almost all others would be jettisoned.This includes the tax deduction people can claim for the state and local taxes they pay each calendar year, a provision that saves taxpayers more than $1 trillion every 10 years. These taxes can be particularly high in states with higher income taxes, such as California and New York, so the change could be acutely felt there.
"It's not the federal government's job to be subsidizing the states," Mnuchin told reporters at the briefing with Cohn.
Cohn is right: the deduction is a subsidy for state governments... a subsidy that benefits high-tax states that primarily vote for Democrats. On principle I'm in favor of eliminating most deductions, and I'm sure it's no coincidence that Trump's political adversaries will be hardest hit.
In the midst of advising California Democrats to not mote the state's primary earlier in the year for the 2020 election cycle, Michael Barone notes that America's most populous state has been drifting pretty far left from the mainstream.
As I wrote in a December 2016 Washington Examiner column, is that for the first time in the nation's history our largest state has voted at one end of the political spectrum. California has become a political outlier. New York, the largest state in censuses from 1820 to 1960, almost always voted within 5 percent of the national average in those years. So did California from the time it became the largest state in 1963 up through 1996. But it voted 6 points more Democratic than the nation in 2000 and 2004, 9 points more in 2008, 10 points more in 2012 and a whopping 14 points more Democratic than the nation in 2016. Only one state, Hawaii, voted more Democratic, and by only 1 point.
This monolithic drift isn't good for America, and it isn't even good for left-wing Californians. Breaking the state up into several smaller states would allow the people in different regions of California to have governments that most suit them -- and a break-up could easily be crafted that preserves a net advantage of two Senators for the Democrats. The only people who would lose from the break-up would be the hacks who sit atop the pyramid of government now.
