Agitating that “the rich” pay their “fair share” to expand government is embedded in progressive DNA. Yet when Republicans propose to eliminate a generous tax break that benefits the wealthy, Democrats quickly abandon their class-warfare rhetoric.
In the wake of the health-care debacle, the GOP Congress is poised to move on to tax reform. That will almost certainly include limiting or killing a number of popular deductions available to taxpayers who itemize, about 30 percent of all households.
Among tax breaks that Republicans have in their sights is the deduction for state and local income taxes. The Associated Press reported this week that the average deduction is about $11,800, but the number is much higher in many states. In New York, for instance, the typical break is $21,000. Next in line are filers in Connecticut ($18,900), New Jersey ($17,200) and California ($17,100).
The nonpartisan Tax Policy Center estimates that eliminating the deduction would raise $1.3 trillion over a decade. Households with earnings of more than $500,000 would bear 40 percent of the burden, the center calculates.
“The deduction is heavily weighted to families with high incomes,” the AP notes. Martin Sullivan, chief economist for Tax Analysts, told the wire service, “It provides massively disproportionate deductions to high-tax states controlled by Democrats.”
And there’s the rub. The tax break enables politicians in big-government, high-tax states — most of which are overwhelmingly Democratic — to disguise the true price of their redistributionist agenda. It encourages a destructive tax-spend-elect philosophy that has driven some municipalities — and even a few states — to the brink of fiscal ruin.
Democrats fear that the elimination of the state and local income tax deduction might inspire taxpayer revolts in states they have long dominated.
Make no mistake: Letting people keep more of their own money is a good thing. But an overly complex tax code stuffed with special-interest loopholes invites corruption and cronyism, eroding public confidence and jeopardizing economic growth. Simplification promises a fairer, more equitable system of raising government revenue.
In addition, the elimination of certain tax deductions under most Republican tax proposals would be offset by lower marginal rates for all Americans. “We’re proposing a much simpler code,” said Rep. Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee, “with lower rates where everybody gets help, whether they are paying their state and local taxes or they are putting their kids through college.”
And if that means high-tax, blue enclaves can no longer use the federal tax code to conceal from residents the actual costs of their big-government policies, then so be it.