TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, November 4, 2017

McArdle: The Republicans Weaponized Tax Reform

Bloomberg View:  Republicans Turned the Tax Code Into a Weapon, by Megan McArdle:

It is hard not to notice that this bill is designed to spread benefits among Trump supporters, particularly the Republican donor class, while laying most of the costs on a single group of people: six-figure professionals living in blue states, a group known as the HENRYs (High Earning, Not Rich Yet). One can make a principled justification for levying high taxes on the rich, who can most easily spare the money. One can make a principled justification for taxing everyone equally, share and share alike. But what is the principle by which almost all of the pain of this tax bill should be borne by affluent, but not rich, people who happen to live on the coasts? Other than “we don’t like them.” ...

But while cui bono should not be the only consideration, it always is at least one. Republicans are trying to sell this tax package as a fairer reform that will make things better for all Americans. If that is what they are actually trying to do, then they should probably not offer something so obviously shaped as a shiv for Donald Trump’s political enemies. If not out of principle, then out of naked self-interest. However astonishing their current disarray, Democrats are going to be back in power someday. And if Republicans weaponized the tax code in this fashion, Democrats are likely to pick up this crudely crafted weapon and turn it on its creator.

http://taxprof.typepad.com/taxprof_blog/2017/11/the-republicans-weaponized-tax-reform.html

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Comments

The Republicans have been such complete a--holes when they're in power that most non-Republicans think about them the way people who were oppressed by the Stasi in East Germany think of Communists.

And now they literally seem like agents of a foreign power (Russia).

Their base is shrinking every year in relative terms. Eventually, not even our lopsided electoral college system will keep them in power.

Posted by: the reckonning | Nov 4, 2017 12:09:52 PM

Why shouldn't HENRYs pay more in taxes? That socioeconomic group rhetorically supports higher taxes generally, so this would essentially by the Feds forcing them to put their money where their mouth is.

And what is the logical justification for any deductions? If you're concerned that taxes on your gross income would be too high, whatever that means, lobby your representatives to adjust the brackets downward...

Posted by: MM | Nov 4, 2017 4:23:27 PM

The Democrats have announced that Trump is a racist, sexist, and a fascist and it's the Republicans who have weaponized public policy? I don't think so.

Posted by: mike livingston | Nov 5, 2017 3:02:53 AM

Question here. Do the numbers I see in the paper as to the average deduction for state and local taxes take into account all those who get no deduction at all due to the AMT? Talking to an accountant friend here in the Bay Area, she said that almost all her clients are subject to AMT.

Posted by: PaulB | Nov 5, 2017 9:58:12 AM

One particularly ironic aspect of the “targeting” of blue states as alleged by the author is that any damage done by the elimination of the SALT deduction is self-inflicted. These state have chosen the path of high state and local taxation, unlike some red states where state income tax rates are either relatively low or non-existent.

Posted by: Tim Kelly | Nov 5, 2017 12:32:03 PM

Having high state and local taxes is a good idea if the money is used to provide high quality education (K-12 + Public Colleges and Universities); public safety (cops and firefighters and prosecutors); physical infrastructure--roads, bridges, tunnels, trains and transit systems, airports, seaports; libraries, safe drinking water, and all of the other absolutely economically essential things that state and local governments provide.

The high-tax states have a more productive population (i.e., higher GDP per capita) and are safer (longer life expectancy) thanks to many of these expenditures.

It's the low tax states that have been inflicting damage on themselves by letting their people die in unnecessary car accidents, get poisoned by environmental hazards, and lose jobs to global competition because they are poorly educated.

It is practically treasonous that the Republicans are defunding these programs in order to give $700 billion to foreign investors.

9/11 probably did less damage to New York than the Republicans are about to do.

Posted by: Come on | Nov 5, 2017 5:25:38 PM

Accusing the GOP of ‘weaponizing’ the tax code in the wake of the Lois Lerner & co. scandals of the Obama administration is falling-down funny.

Posted by: Wright Truesdell | Nov 6, 2017 7:39:17 AM

" But what is the principle by which almost all of the pain of this tax bill should be borne by affluent, but not rich, people who happen to live on the coasts?"

They're the ones that keep demanding higher taxes? Give them what they've been asking for I say!

Posted by: aerodawg | Nov 6, 2017 7:39:28 AM

Reckonning - "The Republicans have been such complete a--holes when they're in power that most non-Republicans think about them the way people who were oppressed by the Stasi in East Germany think of Communists."

Wow, what color is the sky in your world? I'm not a fan of the republicans last I check it was democrats that had some child sing songs to Obama. It was the democrats who weaponized the IRS. It was the democrats that pass bills without reading them. It was the democrats that vote for socialism (Sanders), that want to get rid of the 1st amendment, cause violence and act like 3 year olds.

The problem with the GOP is that they cave and don't say what they are going to do.

Taxing the "blue states" - no really. If your state has a high state tax, why should other states help you pay your government bill. Democrats have said we need high taxes (And they never donate willing to pay taxes btw). So what is the issue?

Posted by: Nick O | Nov 6, 2017 7:47:07 AM

How is discontinuing a subsidy of blue state government services "punishing" the former recipients of the subsidy?

Posted by: Nancy | Nov 6, 2017 7:49:48 AM

This is a great improvement. It not only taxes the more affluent, it taxes most those in blue states who have been loudest champions of high taxation. It's giving them what they say they want—although admitted not what they have been doing.

It also eliminates a major unfairness in our tax code. Those in blue communities have been getting a tax break for a host of amenities their communities provide that in red communities are paid for by after-tax income by individuals. Now everyone pays the same.

Posted by: Michael W. Perry | Nov 6, 2017 7:53:20 AM

There can be no valid complaint from blue staters about them paying more taxes. They've been telling us for years that "we" need to pay more. Soon, they'll have the opportunity to eat their own dog food.

Posted by: David Longfellow | Nov 6, 2017 8:52:08 AM

Here's your principle: Justice.

The affluent coastal classes have willfully economically and culturally devastated my native region.

Higher taxes are a slap on the wrist. You're getting off easy. Be grateful for that.

Posted by: Luke | Nov 6, 2017 9:08:57 AM

Taking away these deductions is not nearly as politically biased as giving these deductions was in the first place.

Posted by: David D | Nov 6, 2017 5:51:10 PM

According to the *conservative* tax foundation, the "blue states" are already heavily subsidizing the red states by paying a lot more in federal taxes than they are getting back.

https://taxfoundation.org/federal-spending-received-dollar-taxes-paid-state-2005/
https://taxfoundation.org/states-rely-most-federal-aid/

So the Red states have decided to vote themselves even more of the blue states money. Nice one, guys. Way to refight the civil war and prove everyone who says the Republicans are really Neo-Confederates right.

Posted by: Blue states | Nov 6, 2017 7:04:29 PM

Other than “we don’t like them.” Ah, I think it is the other way around. Namely, the Blue State HENRYs have been very focal in expressing their hatred of all of us Deplorables who live in red states.Simple truth is why should we, the uneducated, unwashed red state masses, have to support those who live in high-tax states?

Posted by: Dale Spradling | Nov 7, 2017 5:16:54 AM

"The high-tax states have a more productive population (i.e., higher GDP per capita) and are safer (longer life expectancy) thanks to many of these expenditures."

Actually, individuals and businesses in blue states contribute to GDP, and not everyone who does so contributes equally, or is "blue" politically.

But it does beg the question, since I live in the biggest, bluest state in the union:

Why does this progressive paradise have the highest inequality and poverty rates?

Would you like to explain that away for me?

Posted by: MM | Nov 7, 2017 1:18:34 PM