Friday, January 26, 2018

Blue States Claiming Federal Government Cannot Reduce State and Local Tax Deductions

If you missed it, three blue states are going to sue the national government for effectively interfering in their high tax system of government.  Megan McCardle examines the several reasons this will not work.
It’s an unhappy time to be a high-income professional in a blue state -- or their governor. The new tax law, which caps the deduction for state and local taxes at $10,000, amounts to a roughly one-third increase in their effective state-and-local tax rate. That will be an ugly hit to the pocketbook.
They will fiercely resist any attempt to raise taxes further, bad news for mayors and governors who are often facing big pension holes that are eventually going to need to be filled with taxpayer money. Worse still, they will probably put pressure on said politicians to lower taxes. And some of them may start shopping for residences in lower-tax locales, taking their valuable, taxable incomes with them if they go.
Small wonder that officials in high-tax states are desperate to find some way to undo what congressional Republicans have wrought. A number of proposals have been floated in the last month, all of them interesting, none of them likely to work very well.
Call the Wah-bulance.  All the rich leftists now will own the consequences of their support for high taxes, by paying them without any federal assistance. As long as they do not move to flyover country and start destroying us.

A comment over there started with stats cannot go bankrupt, which led to the 14th Amendment's declaring all Confederate debt void, then, "So, crazy thought - if a state wants to declare bankruptcy, could they just devote some amount of money to a token insurrection of some sort?"

And: "You know, since November 2016, I have this strange affliction: I break out into smiles randomly and broadly. Uncontrollably so."


  1. States don't need to declare bankruptcy. They are sovereigns and don't have to make any payments they don't want to.

  2. I had not thought of that. Public employee pensioners vs. taxpayers: a new sport.

  3. When they stop making payments, they no longer have lending available to them.

    Back around dotcom days, CA instituted a 10% surcharge on all income for those making $1M/yr. There were 15k taxpayers in that category in CA, and 1/3 of them bailed that year. No stats on how much business and jobs left with them. They tried to add even more in the late 00's, but that failed. However, they added another 3% recently.

    Sort of connected: it costs twice as much to rent a uhaul to go from CA to TX, as it does in reverse. They have to ship most of them back here, so you are paying for that.

  4. "When they stop making payments, they no longer have lending available to them."

    If they could declare bankruptcy, they would no longer have lending available to them.