The Jig is Up for High Tax States

By | 2017-06-02T18:30:05+00:00 December 20, 2017|
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With tax reform finally on its way to President Trump’s desk, it’s safe to say that the Left is unlikely to let up on its misleading attacks on the nature of the plan and those who advocated it. The mischaracterizations are numerous. They amount mostly to a “fake narrative” that the bill benefits the wealthy and big business at the expense of the “middle class.”

Of course, there is a hue and cry from Democrats about the  limitations placed upon deducting state and local taxes. Democrats know that particular provision is going to expose the blue state/high state tax model to an uncomfortable political squeeze. It’s less easy for voters to favor leftism when they actually have to pay for it. So Democrats mischaracterize this as a tax increase, when it is in fact the greatest addition to progressive tax “fairness” in recent memory.

Let’s start with the nature of taxation in the United States. Our republic was founded upon the principle that taxation was only legitimate when it was supported by and with the consent of the governed through their direct representatives. This is why the House of Representatives has the sole power of new taxation, and also why a federal income tax was considered unconstitutional until a little over a century ago with the passage of the 16th Amendment. America’s Founders did not envision the federal government as the primary tax collector; that was always expected to be the role of state governments and centered around state priorities.

Federal taxes, whatever they were to be, had a simple requirement from the Constitution. They had to be the same for everyone, regardless of state of residency. Article I, Section 8 of the Constitution grants Congress the power to tax, but with the limitation that, “all duties, imposts, and excises shall be uniform throughout the United States.” In Article 1, Section 9, among the list of denied powers of Congress is: “No capitation, or other direct tax shall be laid, unless in proportion to the census or enumeration herein to be taken.”

The simple fact is that allowing taxpayers to deduct their state and local taxes from their federal income taxes creates an inequality in the rate of taxation throughout the United States. Here’s why.

First, if one lives in a state with high income and property taxes, such as California, New York, or Illinois, under the old tax code you would be entitled to write off large sums of money from your federal tax bill that people in more reasonably taxed states were unable to deduct.

In other words, you were actually paying a lower percentage of your income to the IRS than a person with the same level of income in a low-tax state such as Florida, Delaware, or Utah. In essence, taxpayers in the low-tax states are subsidizing the state governments of places in which they do not live or have right to vote, by paying a higher rate of their income to the IRS.

Giving a tax break to those in the higher taxed states isn’t just a tax cut; it is at the same time a tax increase. Taxes need to be high enough to fund massive federal spending, so the rates are higher than they really need to be to account for the state tax deductions.

Tax deductions are not necessarily a bad thing. They can provide incentives for charitable giving, retirement savings, and even investments to expand our economy and promote the general prosperity and welfare of all. All these things (and others) provide benefits for the nation as a whole, and are thus reasonable and constitutional.

Trouble is, breaks to the taxpayers of California are not necessarily of benefit to taxpayers in North Carolina or Wyoming. Voters in those states should not be expected to accept them. If Californians want to create and fund an elaborate welfare state and system of public works, it is of course proper for them to do so. But it is also proper for them to pay for it with the consent and money of their own citizens. It is not proper to expect those without a vote in California to subsidize them.

If the prospect of a higher federal tax bill disturbs taxpayers in California, New York, or any other high-tax state, they have the means to stop it. With their franchise as a voter in their state elections, they can demand lower taxation. If they do not want to pay for all that their government finds worthy of their hard-earned wages, they can elect state representatives who will reflect their wishes. And if they wish to continue to have a generous state government, they can continue to vote for those who created it. And foot the bill.

The truth is, Democrats like obscuring this expense because it maintains their hold on power. Let’s see how long it lasts when voters in blue states actually have to start paying for these expensive schemes themselves.

About the Author:

Sam Agami
Sam Agami has taught American History, Civics, and Economics in the Virginia Beach Public Schools since 1999. He earned a M.A. in American History and Government from Ashland University in Ohio. A native of New Rochelle, NY, he currently resides in Norfolk, VA with his wife Deanna.
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  • Bruce1369

    Yep. No more supporting free-spending communist States. You pay for your own Commie utopia.

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  • Anthony Brown Jr.

    The tax revolt in these states, if and when it happens, will be spectacularly glorious to watch. I will get some popcorn and watch it live…..

  • wildbillcuster

    I think forcing blue state taxpayers to confront the non-sustainable reality of their government systems is going to be the most significant result of the tax reform bill.

  • URstandingwhere
  • Bob Clampett

    What I find amazing is how an embattled President, who is beset from all sides, is reshaping the American government in the face of overwhelming opposition and odds.

    As this nation was dedicated to Jehovah God at its founding, are we seeing His mighty Hand at work?

  • Bill Richardson

    Absolutely correct. So the folks in the land of fruits and nuts gotta start paying their own way.

  • Don Anastas √ #WAR

    I’m Republican but let’s be fair and include part of the GOPe RINO Brigade!

    New York Rep. John Faso

    North Carolina Rep. Walter Jones

    New York Rep. Pete King

    New York Rep. Lee Zeldin

    New Jersey Rep. Chris Smith

    New York Rep. Elise Stefanik

    New Jersey Rep. Leonard Lance

    New Jersey Rep. Rodney Frelinghuysen

    California Rep. Darrell Issa

    California Rep. Dana Rohrabacher

    New York Rep. Dan Donovan

    New Jersey Rep. Frank LoBiondo

    Merry Christmas!

  • Joel Mathis

    “Trouble is, breaks to the taxpayers of
    California are not necessarily of benefit to taxpayers in North Carolina
    or Wyoming. Voters in those states should not be expected to accept
    them. If Californians want to create and fund an elaborate welfare state
    and system of public works, it is of course proper for them to do so.
    But it is also proper for them to pay for it with the consent and money
    of their own citizens. It is not proper to expect those without a vote
    in California to subsidize them.”

    I raise you:

    “Defenders of the deduction, including Republicans from states such as
    New York and New Jersey, counter that even after the deduction, their
    states pay far more in federal taxes than they receive in federal spending.
    By that standard, wealthy populous blue states such as California
    subsidize less developed mostly red states. South Carolina, for example,
    despite its long history of opposition to the federal government, takes
    nearly $4 in federal spending for every dollar its citizens pay in
    federal taxes.”

    https://www.washingtonpost.com/news/made-by-history/wp/2017/10/30/blue-states-already-subsidize-red-states-now-red-states-want-even-more/?utm_term=.d1ad2c88cc6f

    It’s ok for Calfornia to subsidize South Carolina through a different mechanism, though, right?

    • Don Anastas √ #WAR

      Nice cut & paste from WAPO – leaders of a free Constitutional Republic! Always brokers of truth in the media! NOT!!!

      • Joel Mathis

        “Nice cut & paste from WAPO – leaders of a free Constitutional Republic! Always brokers of truth in the media! NOT!!!”

        What did I quote from them is incorrect?

        • Don Anastas √ #WAR

          The entire biased article! At least their consistent like good little Communists!

          • Joel Mathis

            So you’re not contesting any facts. Just screaming “biased” without offering any evidence that they’re wrong?

            Cool story, bro.

          • Don Anastas √ #WAR

            I don’t subscribe to that rag but based on your article quote from WAPO vs. the points made on AG it’s very easy to separate fact from fiction, economics from WAPOs alternative universe of big government & redistribution of wealth according to doctrines of Keynes & Marx, both dubious theories when put into practice simply don’t work.

            Now we will see how those states contend with the new economic reality. To paraphrase Margaret Thatcher – “What do you do when you run out of other people’s money?”

          • Joel Mathis

            That still doesn’t tell me why the WaPo’s presented facts were wrong. You’re still yelling “bias” and avoiding facts.

          • Don Anastas √ #WAR

            Typical Liberal argument! You just don’t understand the answer! WAPO has NOT presented any facts, that’s the issue!

            Merry Christmas!!

          • Joel Mathis

            Sure they have.

            This is either true or it isn’t: “Republicans from states such as New York and New Jersey, counter that even after the deduction, their states pay far more in federal taxes than they receive in federal spending. By that standard, wealthy populous blue states such as California subsidize less developed mostly red states.”

            This is either true or it isn’t: “South Carolina, for example, despite its long history of opposition to the federal government, takes nearly $4 in federal spending for every dollar its citizens pay in federal taxes.”

            This is either true or it isn’t: “For 80 years, residents of the populous, high-tax (and today mostly blue) states have subsidized their fellow citizens in lower income, lower tax (and today mostly red) states.”

            The author draws on a long history and describes it.

            The response to whether it is true or isn’t is not to yell “liberal!” but to accept that it’s true – or to demonstrate why, factually, it’s not. How you feel about it, or the Washington Post, is completely irrelevant to its status as truth.

    • USInfidelPorkEater

      J. Mathis, you are in effect saying that you believe that the WaPo article is, in fact, true. But you do not back up that article with any facts of your own. Your antagonist, on the other hand, does not believe the WaPo article is true (for that matter, neither do I) but neither of us have the facts to back up our belief. I hope that while you are a true believer that you aren’t so dumb that you believe what is expounded in the media. Especially, the WaPo, which is in my mind a rag to preach the Liberal/Progressive line to those of our country who cannot think for themselves but follow the pied pipers of ignorance. Just my opinion and you can take it and $5 and buy a cup of coffee in most restaurants (but not all.)

    • Sam Agami

      The problem with this premise is that it requires acceptance of the progressive narrative that all government authority comes from a mandate from direct democracy. The Constitution creates legitimacy party from democracy, partly from the constructs of the federal republic through limited state sovereignty. If the Congress creates spending programs that benefit some states more than others, it is only because the representation of all the states, as well as the people, has decided upon it. That makes it just and legitimate. What makes deductions for state taxes fundamentally unequal and unjust is that they are the result of individual state actions that adversely affect those who have no voice in selecting those representatives. This is not about the progressive ideal of “fairness,” rather the founding principle of no taxation without representation.

  • Bill Robbins

    As a CA taxpayer, I suggest that getting rid of the state legislature would be an effective way to reduce the tax burden in California.

  • John Alway

    “Tax deductions are not necessarily a bad thing. They can provide incentives for charitable giving, retirement savings, and even investments to expand our economy and promote the general prosperity and welfare of all. All these things (and others) provide benefits for the nation as a whole, and are thus reasonable and constitutional.”

    The primary and proper argument for cutting taxes is that the individual has the right to keep what he’s earned. That gets to the heart of the founding principles of America. And, really, the best government would be one that didn’t tax, but, rather, relied on voluntary contributions. That would most likely work if the government were reduced to it’s proper role of upholding individual rights, and leaving the rest up to free people to decide and do voluntarily.

    It’s amazing that before 1913 there was NO Federal Income tax. We need to get back to that. Repeal the 16th Amendment. When that was passed there was this notion that the Federal tax rate would be very low, and, of course, that notion has turned out to be a complete farce. That and the creation of the Federal Reserve were two of the worst things ever done by the American government. 1913 was a bad year.

    Freedom works. It’s too bad that’s not understood.