RUSH: There’s a story here that ran on the Fox Business Network: “Will SALT Cap Ruling Accelerate High-Tax State Exodus?”
This is a weird headline. What this story is about, a Manhattan judge — and we did this in our Morning Update today. “A Manhattan judge dealt a blow to multiple high-tax states this week, including New York, which could drive even more taxpayers to,” leave to low or no-income-tax states.
“Four blue states sought to challenge the $10,000 cap on state and local tax deductions –” See, in these blue states, massively high state and local taxes were not that big a factor because the wealthy could deduct them on their federal tax returns. So high-tax states were allowed to go ahead and tax out the wazoo because the big donors were able to deduct all of those taxes on their federal return.
Trump’s tax reform bill capped the deductibility amount at $10,000, which for the people that we’re talking about here is walking-around money, chump change, tip money, if you will. So they went into court, they wanted to get this overturned, they wanted to try to say that the Feds cannot have anything to say about state and local taxes. And in a shocking move, a federal judge told them to go pound sand!
And I read this story, there’s something fascinating in this. It’s really fascinating. Other than a quote from a former CEO whose name nobody would know, there’s no mention of the solution to this problem. If you’re the state of New York and you were able to raise state taxes all you wanted because people paying them would be able to deduct that amount on their federal return and all of a sudden they can’t deduct, well, now what those state and local taxes are matters. People are actually gonna have to pay them now instead of being able to deduct them.
So there’s an obvious solution to this. If people’s reaction to this is to leave New York and to leave Connecticut, to leave California or some of these other high-tax states, then what’s the solution? Well, the solution would be keeping them there. You need the taxpayers. You need the tax base. You don’t want them leaving. And throughout this whole story, nobody comes up with the obvious solution. Which is what?
Lowering state and local taxes. It’s real simple! You cut your own taxes! If people are fleeing your state because of high taxes, you cut them! But they don’t even consider it. It doesn’t even cross their minds in Albany. It doesn’t cross their minds in Connecticut. It doesn’t cross their minds in Sacramento. “What do you mean, cut taxes? Why would we do that?”
Well, because now people can’t deduct them and so they’re going to no-income-tax states. “Well, no, no. We’re gonna find a way that they can’t move.” Oh. You’re gonna find a way to restrict their freedom?
“Damn right we are. We’re not gonna let ’em leave.” Well, why don’t you just cut taxes?
“What does that even mean, cut taxes?” Well, lower them so that people have to pay less.
“Oh, no, we can’t do that.” Why not?
“Well, we need the revenue.” You’re not getting the revenue because it’s leaving the state!
“It doesn’t matter. We still can’t cut taxes.” Well, then okay. How about cutting the budget?
“What do you mean, cutting the budget?” Spending less.
“Oh-ho-ho no, we can’t do that.” What do you mean you can’t do that?
“How does that even work? How do you spend less?”
So they’re in this vicious cycle. And the obvious solution is staring them right in the face: Cut taxes if you don’t want people to leave. It never even occurs to them. (interruption) Screw the safety. What safety net? What safety net are we talking about here? You mean for the downtrodden, the poor, the thirsty?
They can’t cut taxes because it’s less graft money to play with. It’s nothing about the safety net for the downtrodden. Cutting taxes they think is reducing revenue and if there’s less revenue to play with, there’s less revenue to steal, there’s less revenue to misdirect! There’s less revenue to put in your consultancy group that’s between you and a government contractor.