NYC Boss

NYC Boss

Dem governors sue the federal government to save tax breaks for the rich

Dem governors sue the federal government to save tax breaks for the rich

Democratic governors in New York, New Jersey, Connecticut, and Maryland (while Maryland's Larry Hogan is a nominal Republican, he may as well be a Dem) are suing the federal government because they don't believe that Congress has the right to make tax policy.

The Republican tax cut caps the deduction for state taxes at $10,000.  About 70% of taxpayers in most high-tax states are not affected because they pay less than the cap in state and local taxes.  But the top 30% of earners are going to be forced to pony up, leading to substantially less revenue for states.

The irony is delicious.  Democrats, who are always complaining that the rich don't pay their "fair share" of taxes, are suing to stop the rich from paying a fair share of taxes.

The state and local tax deduction for wealthier residents allowed these governors to jack up tax rates because those paying the most knew they could write off the excess on their federal tax returns.  No more.

Las Vegas Review-Journal:

Without the unlimited deduction, tax-and-spend politicians in locales such as New York fear many high earners will flee to more favorable tax climes or exert pressure on their representatives to reduce levies, particularly sky-high property taxes.

As a result, it's fourth down and 99 yards to go and they're throwing what can be charitably described as a wounded- duck Hail Mary.

The lawsuit argues the tax law ignores the longstanding practice that "the federal government's income tax power was and would remain subject to federalism constraints," The New York Times reported.  One law professor told the Times that the legal action is "an original work of scholarship."

That's academic-speak for "they're out of their bloomin' minds." 

No kidding.  In fact, the new tax legislation treats every state precisely the same and doesn't affect any state tax statute anywhere in the country.  The notion that it's unconstitutional for Congress to write federal tax law, including rules for deductions and write-offs, shouldn't be taken seriously by a federal judge.

The legal action is just one of many attempts by big-spending state politicians to mitigate the effects of the Trump tax reform.  Another gimmick, under discussion in California and New York, would create government "charities" to which taxpayers could donate in lieu of paying state taxes.  Expect the IRS to put the kibosh on that scheme.

In the end, of course, blue-state progressives will ignore the simplest and most productive course that might help keep their residents at bay: Reducing the massive tax burdens they've imposed to feed their destructive dependence on other people's money.

There is a law of diminishing returns when it comes to taxes that these blue-state Democrats apparently believe they can avoid.  The higher you raise tax rates, the lower down the percentage increase in revenue goes.  Illinois is a perfect example.  Wealthier taxpayers are fleeing the state in record numbers due to the punishing tax burden.  So while the rates may increase,  there are fewer people to pay, leading to lower than predicted revenue.

The suit won't go anywhere, unless there is a sympathetic federal judge willing to ignore the Constitution and rule in the plaintiffs' favor.  But it will take a large amount of legal legerdemain to twist the law that much. 

Democratic governors are just going to have to make do with less.

Democratic governors in New York, New Jersey, Connecticut, and Maryland (while Maryland's Larry Hogan is a nominal Republican, he may as well be a Dem) are suing the federal government because they don't believe that Congress has the right to make tax policy.

The Republican tax cut caps the deduction for state taxes at $10,000.  About 70% of taxpayers in most high-tax states are not affected because they pay less than the cap in state and local taxes.  But the top 30% of earners are going to be forced to pony up, leading to substantially less revenue for states.

The irony is delicious.  Democrats, who are always complaining that the rich don't pay their "fair share" of taxes, are suing to stop the rich from paying a fair share of taxes.

The state and local tax deduction for wealthier residents allowed these governors to jack up tax rates because those paying the most knew they could write off the excess on their federal tax returns.  No more.

Las Vegas Review-Journal:

Without the unlimited deduction, tax-and-spend politicians in locales such as New York fear many high earners will flee to more favorable tax climes or exert pressure on their representatives to reduce levies, particularly sky-high property taxes.

As a result, it's fourth down and 99 yards to go and they're throwing what can be charitably described as a wounded- duck Hail Mary.

The lawsuit argues the tax law ignores the longstanding practice that "the federal government's income tax power was and would remain subject to federalism constraints," The New York Times reported.  One law professor told the Times that the legal action is "an original work of scholarship."

That's academic-speak for "they're out of their bloomin' minds." 

No kidding.  In fact, the new tax legislation treats every state precisely the same and doesn't affect any state tax statute anywhere in the country.  The notion that it's unconstitutional for Congress to write federal tax law, including rules for deductions and write-offs, shouldn't be taken seriously by a federal judge.

The legal action is just one of many attempts by big-spending state politicians to mitigate the effects of the Trump tax reform.  Another gimmick, under discussion in California and New York, would create government "charities" to which taxpayers could donate in lieu of paying state taxes.  Expect the IRS to put the kibosh on that scheme.

In the end, of course, blue-state progressives will ignore the simplest and most productive course that might help keep their residents at bay: Reducing the massive tax burdens they've imposed to feed their destructive dependence on other people's money.

There is a law of diminishing returns when it comes to taxes that these blue-state Democrats apparently believe they can avoid.  The higher you raise tax rates, the lower down the percentage increase in revenue goes.  Illinois is a perfect example.  Wealthier taxpayers are fleeing the state in record numbers due to the punishing tax burden.  So while the rates may increase,  there are fewer people to pay, leading to lower than predicted revenue.

The suit won't go anywhere, unless there is a sympathetic federal judge willing to ignore the Constitution and rule in the plaintiffs' favor.  But it will take a large amount of legal legerdemain to twist the law that much. 

Democratic governors are just going to have to make do with less.

Published at Mon, 23 Jul 2018 05:00:00 +0000