Proving that there’s no more dangerous place on earth than the space between a liberal politician and other people’s money, the governors of California and New York have been seething over the part of the Tax Cuts and Jobs Act that limits the deductibility of state and local taxes (SALT). Privately worried that this change will adversely impact their ability to continue to fleece their wealthiest residents, or actually motivate them to move their primary residence to a low tax state (something NYC Mayor DeBlasio cluelessly dismisses), they publicly (and falsely) rage that the SALT cap harms everyone in their states, that it must be unconstitutional, and that they’re going to find ways to get around it.
Ideas that include monkeying with the payroll tax and setting up the states as “charities” with compulsory contributions are being floated, but I won’t go into the myriad problems with those ideas here. Instead, lets consider the underlying reasons for the rage, which sum up to “these are OUR geese!”
Indeed, the real reason blue-state politicians are angry over the feds reducing a tax break for high earners is because of the increased scrutiny of their own tax rapacity it is likely to prompt. For over a century, high-tax states have used the deductibility of the taxes they impose on their residents to reduce the “sting” of those taxes. Yes, there are arguments that removing federal deductibility is tantamount to double taxation, but if so, why do only 5 states allow deduction of federal taxes? Furthermore, to think in terms of double taxation, one would need to consider government one entity, undermining the argument for states having their own tax systems, or for states in general. The feds, the states, and municipalities provide very different services, and to consider “double taxation,” one would have to also assert that taxes are being taken for duplicate purposes.
There’s other sophistry floating around on this topic, but that’s what it is: deceptive word salad to hypocritically defend a greedy status quo.
As a parallel, consider gambling. Most states ban casino gaming, and those that do not heavily regulate it, treating each license as a benediction or indulgence conferred from those on high. Gambling is purported by politicians and other do-gooders as a destructive vice, and prohibitions are intended to protect the vulnerable from addiction, exploitation, or self-destruction. How, then, to explain that 44 states have one or more lotteries? How, then, to explain the media ads and billboards for things like PowerBall, Mega Millions, and scratch-off games?
Simple. The people and politicians who defend lotteries with pap like “they fund education!” (as if tax revenues from casinos don’t also end up in the same public coffers) only really care about piping the gambling revenue to themselves. In other words, “these are OUR geese!”
Once we understand this, once we recognize the tribalism and parochial attitudes of politicians, we better comprehend the cynical truth behind hyperventilations of people like Govs. Brown and Cuomo over a tax bill that will leave more money in most people’s pockets. Sure, some will argue that the reason the SALT cap was put in place was to punish blue states for not supporting the GOP, but it’s as or more arguable that the SALT deduction was a burden shift from those states to states with lower taxes. In any case, the reasons are secondary to the numbers. By the numbers, this bill is good for most Americans, especially the lower and middle classes. The fact that Democrats are bewailing a law that actually soaks the rich while providing relief to the classes they purport to champion is telling. The Dems resent the fact that their geese are being plucked.
French statesman Jean-Baptiste Colbert observed that:
The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing.
The SALT cap is going to increase the hissing of the fattest geese. Fat geese are geese that can fly long distances, and that is what scares the blue state politicians.
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