If you’re an old-timer like me, cast your mind back to the tax reform of 1986, which was passed on a bipartisan basis, because Democrats understood the logic of tax simplification and cutting rates down to a lower level with a broader base. There’s one detail everyone has forgotten that is relevant today: President Reagan’s initial tax reform proposal included elimination the state and local income tax deduction. Pro-tax reform Democrats told Reagan right away that that idea was a total non-starter, and they couldn’t support a bill that included eliminating SALT (as we call it now). And so ending the SALT deduction proposal was swiftly dropped, and the bill went forward to passage.
Fast forward to recent years. Many thinking Democrats (I know, I know) agreed in principle that our corporate tax rate was too high and should come down. Barack Obama even said it ought to come down to about 25 percent. Hillary Clinton thought so too, if you paid attention to some of her older statements. (In fact, if we had President Hillary today, I think she would have cut the corporate income tax rate, too.) A bipartisan deal like 1986 should have been possible then, no?
Not when “The Resistance” is in full control of congressional Democrats. Because of that intransigence, a Republican-only bill was able to include a sharp (not complete) cutback of the SALT. It is a dagger aimed at the fiscal heart of high tax blue states like Illinois, Connecticut, California, etc.
How big a dagger? Sit down for the feel-good story of the day—I lead with the large headline because it’s just so yummy:
President Donald Trump’s tax cuts will be anything but for about 1 million California taxpayers who will owe Uncle Sam more money a year from now. They’re the Californians who will lose a collective $12 billion because the new law caps a deduction they have been able to take for paying their state and local taxes, according to a new analysis by the Franchise Tax Board.
Very wealthy Californians earning more than $1 million a year will pay the lion’s share of that money, with 43,000 of them paying a combined $9 billion.
Many of those “very wealthy Californians” will be liberal Silicon Valley types, so they deserve it. If even 10 Senate Democrats had been willing to play ball with Republicans on the tax bill, they could have mitigated this blow. I’m glad they didn’t. This is going to be fun to watch going forward. California liberals are already upset that CA is a “donor state,” that is, for every dollar CA sends to DC, it only gets back something like 88 cents in federal spending, while red states like Alabama get something like $1.10 for every dollar they send to DC. This adverse ratio is going to get worse (from CA’s perspective) in the years ahead. Maybe blue states will wake up to the idea of sending less money to DC in the first place?
Meanwhile, this chart from the Daily Shot people, which displays Bank of America’s index of after-tax wages showing they have spiked in recent months as lower taxes boost paychecks, is fun to take in:
I think that’s called “winning.”
Chaser: Just came across this headline, which you can file under “more winning”:
New Jersey voters. Right. I’m going to mix myself another martini tonight to celebrate.