From the last Morning Jolt of the week:
The Tax Hike Coming to Trump Voters in Blue States
Get ready for an epic fight on taxes in Congress that won’t necessarily break along partisan lines; it will break along state lines.
You’re going to hear a lot of scoffing from Republicans that the places where taxpayers use the state and local tax deduction the most are deep blue places like New York City and Westchester counties in New York and Marin and San Francisco Counties in California. Some of the Right will ask why they should care about hitting the wealthiest, and often most liberal places in the country with a giant tax increase. They’ll argue, with some justification, that this amounts to a federal subsidy for high-taxing states, and shields big-spending state and local governments from the full consequences of their appetite for tax increases.
But fans of this move are probably going to want to avoid confronting the fact that it would also hit the suburbs that supported Trump in those blue states hard, too. It’s not just Nancy Pelosi and the folks on Billionaire’s Row in San Francisco who deduct their state and local taxes.
The Tax Foundation calculated which counties’ taxpayers deduct their state and local taxes the most by taking 2014 returns, adding up the total of all of the deductions for state and local taxes, and dividing by the number of returns filed. They created a really cool interactive map with the data. In a lot of ways, it looks like a familiar red/blue map of the presidential vote by county. East coast urban counties take a lot of state and local deductions, and rural parts of the country do not. This is because urban counties usually have high property and local taxes, and more rural red counties usually have lower taxes.
But just because Trump lost states like New York and New Jersey doesn’t mean he didn’t win any places in those states. The county that ranks ninth in the nation in deductions for state and local taxes is Morris County, New Jersey, with $11,440. Trump won that county, 49 percent to 45 percent. Not too far from there is Monmouth County, where Trump won, 52 percent to 43 percent. The average return there deducts $9,105.
Trump lost his home state of New York overall by a wide margin, but won several counties in the suburbs of New York City. He won Suffolk County on Long Island 51 percent to 46 percent; the average taxpayer there deducts $8,096. Trump won Putnam County, north of the city, 55 percent to 39 percent; the average taxpayer deducts even more, $8,855. Trump narrowly won Frederick County, Maryland; residents there average $5,729.
Unsurprisingly, Republicans from these parts of the country hate this idea.
Congressman Peter King (R., N.Y.), who represents part of Long Island, says he is on board with the GOP’s philosophy of eliminating tax breaks and cutting rates, right up to the point where it thwacks his constituents and their ability to subtract $12,000 annual property-tax bills from their federal income.
“I am a Jack Kemp Republican,” he said in a recent interview. “I believe in supply-side economics. I’m all for that. But again, this has a unique hit on Long Island.”
In the weeks leading up to the White House’s announcement, Mr. King, New York Democrats and business groups had been urging Republican leaders in Congress to back off their proposal to repeal the deduction. Instead, the administration—in which the president and his two top economic advisers are high-income residents of blue states—chose repeal.
Yes, the overall tax rates are going to go down, but a lot of these taxpayers are going to see their level of taxable income go up by a couple thousand dollars, eating up a big chunk of whatever reduction the other cuts give them. Are Republicans sure they want one of the first major legislative accomplishments of the Trump era to be a giant tax hike on suburbanites in coastal states?