Blog Credo

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

H.L. Mencken

Wednesday, October 4, 2017

Tax Reform

Tough to focus on this very important topic in our new Gilded Age, but it's worth talking about in between mass shootings and mass outrages by our emotionally stunted manchild president.

Jon Chait notes that tax "reform" is dead.  One reason that doesn't show up in analysis is the idea that Republicans wanted to get rid of the federal tax deduction for state income taxes.  The typical analysis is that this mainly going to hurt "blue" states with already vulnerable House members.

It is true that the states with the highest state income tax rates are usually blue - NY, CA, OR, MN, VT, IA, HI and NJ.  All of those states have rates of over 8%. 

But if you look at states that have income tax rates of over 6%, the list gets interesting.  Sure, there are blue states - CT and DE, for instance.  But the other states are purple - ME, WV, WI. 

Most of the states are red: SC, GA, AR, KY, TN, NE, MT, ID and MO.  All of those states will see de facto tax increases if you get rid of the federal/state deduction. 

I just don't see how they will have the votes for that.

As Chait notes, the GOP will ultimately just cave on everything but cutting the top marginal rate.  Because that is literally the only thing holding the GOP together.

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