Spoiler Alert: It’s a net tax increase for the wealthiest people in the bluest of states, who have ridden the state and local tax deduction to billions in tax breaks.
While everyone living in states that impose an income tax have enjoyed this deduction--myself included--people living in states like California, Illinois, New Jersey and New York have had it much better. Those states impose truly burdensome taxes on their citizens and their only respite has been that those taxes are deductible at the federal level.
Not anymore. Ed Morrissey at HotAir.com breaks it down:
The SALT deduction really only comes into play for people who can itemize enough to outstrip the standard deductions, so its benefit plays mostly to the wealthy anyway.
It also plays mostly to the benefit of a very few states. California and New York taxpayers soak up almost third of all benefits from SALT deductions; add in New Jersey, Illinois, Texas, and Pennsylvania, and they account for more than half of its benefits. Taxpayers in most other states end up footing the bill.
Not only do other taxpayers end up subsidizing the wealthy, they also indemnify blue-state politicians against the consequences of their tax policies. Next year, taxpayers in California, New York, and other high-tax states will have to truly pay for their own taxes rather than foist them off on everyone else. When that happens, will high tax rates be politically sustainable?
Why does this matter, you may ask.
It matters because states like California and Illinois have budget problems that if their magnitude were extrapolated to the federal level, there would be blood in the streets and a torch-and-pitchfork parade to Capitol Hill. Those massive budget outlays for all of the feel-good social programs, state employee salaries & pensions, abusive regulations and general nanny state intrusiveness are paid for in large part by the federal subsidy through the now-gone SALT deduction.
Because tax years, budget calendars and revenue streams won't coincide for another 2-3 years at the earliest, the real pain won't be felt until after the next Presidential election in 2020. By 2021, Hollwood, Wall Street and the Southside will start to feel the pinch. People who have gotten rich by foisting off the burden to the average Trump voter for decades might rethink their options, and the everyday working folks in those states might decide that the blueness of their states ain't such a good idea anymore.
I've been telling everyone who'll put down their smartphone long enough to listen that the 2018 tax cut will prove to be transformational. I won't be proven right until either Trump takes his second oath of office or his successor does.
But mark my words--the transformation is going to happen.
Extra point:
Who else enjoyed Donald Trump saying "Roll Tide!" earlier this month at the White House? I can tell you who didn't--Democrats, establishment Republicans and people suffering from Saban Derangement Syndrome.
Video starts at the sweet spot.
