The Campaign Spot

Can Congress Hike Blue-State America’s Taxes the Highest?

Hmm. Joel Kotkin of Forbes lays out how the tax hikes envisioned by Obama and congressional Democrats will hit blue states hardest.

From this, the GOP could conceivably propose a “tax Blue America” plan:

  • Keep the tax rate on capital gains the same.

  • Raise income taxes on the top income bracket for 2013, those making $398,350 and up (single filers, married joint filers, or head of household).

  • Means-test, or eliminate entirely, the mortgage-interest deduction (which benefits taxpayers in areas with the highest real-estate values and mortgages — i.e., Hawaii, D.C., New York, California, and Connecticut).

  • Means-test or eliminate entirely the federal deduction of state and local taxes, which is disproportionately utilized by those in high-tax blue states: “In 2005, taxpayers in California and New York together made up 20 percent of those claiming the deduction and accounted for 30 percent of its value. Itemizers in New York, New Jersey, Connecticut, and California claimed on average over $12,000 per household.”

The economic damage from these tax hikes would be bad, but the effect would hit hardest in the Northeast, the West Coast, Hawaii, and Washington, D.C.; high earners in those places would find yet another incentive to move to red states with lower real-estate prices, lower state and local taxes, and lower costs of living.

Since the election, many conservatives have grumbled that they wish there was some way to raise taxes on only the 50.9 percent of Americans who voted for the president in November. This may be the option that comes closest to that.

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