High-tax states should abandon misguided schemes and focus on lowering taxes
A recent New York Times story explains how liberals in high-tax states are plotting for ways around the new $10,000 cap on state and local tax deductions that will mostly affect those with high incomes and luxurious homes. But I don’t understand their concern since we have heard for years that the wealthy should be paying more in taxes, and many even proclaim they are happy to. During the recent tax reform debate, one minute liberals complained about massive tax cuts for the rich, the next they groused about how the deductibility cap would hurt those with high-priced homes. Not sure how the media let liberals get away with that one.
Even the Times piece acknowledges most will get a tax cut:
Even in those [high-tax] states, most residents will get a temporary tax cut because of other provisions of the law, including lower tax rates and an increase in the standard deduction.
Yet the liberal scheming begins, starting with an idea from a UCLA law professor that somehow state and local taxes could be considered “charitable donations,” and thus fully deductible for federal tax purposes.
Kirk Stark, a law professor at the University of California, Los Angeles, has suggested that states encourage residents to donate money to their state governments, then let the governments credit those donations against their state income taxes. Such donations would qualify as charitable donations, which are still fully deductible on federal taxes.
Good luck with that, seems to me Congress and the IRS define what’s deductible for federal tax purposes, not state governments.
As I continued reading the piece about the different gimmicks being considered I wondered: will the obvious solution of reversing the bloating of government even be raised as a possibility? Finally this position was articulated in the article:
Republicans argue there is a much simpler solution for high-tax states: lower their taxes.
Joseph Pennacchio, a Republican state senator in New Jersey, said that he opposed limiting the state and local tax deduction but that New Jersey should focus less on gaming the system and more on lowering its tax burden.
Peter Zeller is Director of Operations at Center of the American Experiment.