While the Republicans reconcile the two versions of the tax bill that passed each chamber, it’s important to remember exactly what about each was so contemptible. Surely removal of the SALT (state and local taxes) deduction is at the top of the list.
On the surface, removing the tax deduction that chiefly benefits high tax states makes some sense. Why, after all, should the federal government subsidize a handful of states? That’s a good question, though not one that removing the SALT deduction comes close to answering.
As it turns out, the states that will be hit the hardest by the elimination of the deduction already pay more than their fair share to the federal government. In fact, Uncle Sam uses tax dollars generated from high tax, almost exclusively blue states, to subsidize spending in red states. This has been proven true here and here.
For example, South Carolina, a state known for its opposition to big government, takes in about $4 for every $1 it pays to the federal government. Inversely, Connecticut and New Jersey receive $0.82 and $0.74 back, respectively, for every $1 they pay in federal taxes. So it turns out the federal government is in the business of subsidizing some states, just not the ones the Republicans had in mind.
Another understated result of eliminating the deduction for state and local taxes is that it would usher in double taxation. To be taxed once by the state and local government, and then taxed again by the federal government, despite a large chunk of the original money already being handed off, would create a huge financial burden to American families. This sort of double taxation is contrary to conservative beliefs, but apparently donor dollars matter more than principles.
The long term plan of the Republican party is clearly to diminish the ability of the government (at either the state or federal level) to use tax money to improve the lives of people. The Republicans want to make the economically successful states (like California and New York) more like Kansas. The services provided by governments, including public education, purified water, and sound bridges, are essential for people to be part of the thriving economy today. People are not moving from high tax states to low tax states to avoid taxation– people are moving from low tax states to high tax states to be part of the growing economies in those states.
In essence, removal of the SALT deduction is an ill-disguised attack on blue states. Instead of red states like Arkansas and Kentucky being encouraged to increase state and local taxes so as not to rely on infusions of cash from the federal government, citizens from self-sufficient states are being asked to continue funding them, and now at a greater personal loss. It appears the party of states’ rights only cares about the rights of red states to financially gorge the rest.