Blue States Search For Ways to Preserve Subsidies

Blue state governments are reeling following enactment of the tax reform bill, which among many other virtues, corrects an injustice: residents of low-tax states like South Dakota will no longer be forced to subsidize residents of high-tax states like New York. Or at least, not to the same extent. State and local taxes will still be deductible, up to $10,000.

The Associated Press reports: “States exploring tax changes in response to federal overhaul.”

In New Jersey and California, top Democratic officials want to let people make charitable contributions to the state instead of paying certain taxes.

Sure, that’ll work.

In Connecticut and New York, officials are exploring a switch from income taxes to new ones on payroll. A few governors have even called for tax cuts.

Even! You have to read quite a bit farther to learn any more about this radical approach.

This week, New York Gov. Andrew Cuomo used his state-of-the-state speech to pledge to sue over the GOP tax plan, which he called “an assault” by the federal government.
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“I’m certainly not a constitutional lawyer, but the notion that this is not constitutional is something we want to pursue,” said Phil Murphy, New Jersey’s Democratic governor-elect.

You really have to laugh about that one. It is an “assault” to say that taxpayers in South Dakota only have to subsidize New Yorkers up to $10,000? And the State of New York will sue, alleging that the Constitution requires South Dakotans to subsidize them? What provision of the Constitution might that be? I somehow missed that one when I studied constitutional law.

More on turning taxes into charitable deductions. (Actually, it has always been possible to donate money to the federal government, but few have been moved to do so.)

California state Senate President Pro Tem Kevin de Leon, a Los Angeles Democrat who is running for the U.S. Senate, introduced legislation this week that would allow people to make charitable donations to the state instead of paying income taxes. That would allow them to claim a charitable deduction on federal taxes.

“Our hard-earned tax dollars should not be subject to double-taxation, especially not to line the pockets of the Trump family, hedge fund managers and private jet owners,” de Leon said in a statement.

It’s nice to know that Democrats are now opposed to double taxation! If they had told us this sooner, we could have eliminated taxes on dividends and permitted repatriation without applying the U.S.’s onerous and redundant corporate income tax–something the Democrats fought tooth and nail.

The AP turns to one conservative commentator for a moment of sanity on the proposal to replace income taxes with payroll taxes:

Nicole Keading, an economist at the conservative-leaning Tax Foundation, said that change also could mean that states would replace progressive income tax structures with flat payroll taxes.

“You would be raising taxes on low-income people,” she said.

Not that the Democrats have ever minded doing that. But the issue here is a simple question of fairness. If voters in a particular state think it is worthwhile to enact high taxes to support high spending by their state, fine. But they can’t expect residents of states that have made different policy choices–and whose governments are, in all probability, more efficient–to subsidize their choice.

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