TaxProf Blog

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

Sunday, February 4, 2018

NY Times: The Republican Tax Act Could Turn Texas Blue

Texas 3New York Times Sunday Review, The Republican Tax Act Could Turn Texas Blue:

Every major policy overhaul has unanticipated consequences, and the Tax Cuts and Jobs Act will be no exception. One tantalizing possibility for this one: The Republican tax overhaul helps Democrats in the midterm and 2020 elections by bringing forward the date at which a few critical states — Georgia and possibly even Texas — flip from red to blue.

How might this happen? It stems from the new caps on the home mortgage interest and state and local tax deductions. Restrictions on building have pushed up the costs of housing in expensive coastal blue-state cities like San Francisco, Los Angeles and New York City. High income and property taxes piled onto exorbitant rents and mortgage payments amount to cost-of-living force fields that already deflect talented workers to relatively affordable red-state cities, like Phoenix, Houston, Atlanta and Charlotte, N.C.

The tax act’s ceiling on deductions is likely to make many blue-state metro areas even more expensive — at least in the short run.

With the Republican changes to the tax code, the high-cost dynamic that has effectively redistributed some probable Democratic voters from left-leaning to right-leaning states will be thrown into overdrive.

Furthermore, the lowered corporate tax rate is also more likely to spur capital investment, business expansion and job growth in places that are both economically thriving and comparatively cheap — many of them urban areas in red states — which should bring a relative abundance of attractive new opportunities and cost-conscious job seekers.

It’s only mildly surprising that Republican tax reform would stick it to Democratic states and goose the growth of powerful Republican states. But it might come as a shock that this could speed us toward the date when these states are no longer reliably Republican. ...

Residents in the states with the highest net in-migration rates bear a relatively low tax burden. Economists have only begun to study the effects of tax rates on particular subgroups of movers, but recent results are suggestive. In a 2017 paper published in the American Economic Review [The Effect Of State Taxes On The Geographical Location Of Top Earners: Evidence From Star Scientists], the economists Enrico Moretti of the University of California, Berkeley, and Daniel J. Wilson of the Federal Reserve Bank of San Francisco looked at addresses on patent filings to track the movements of top scientists and found that “state taxes have significant effect on the geographical location of star scientists and possibly other highly skilled workers.” ...

Incentives matter. The dynamic that gave Texas a net gain of nearly a million domestic migrants since 2010 isn’t about to go away. It’s about to get stronger.

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"The Republican tax overhaul helps Democrats in the midterm and 2020 elections by bringing forward the date at which a few critical states - Georgia and possibly even Texas - flip from red to blue."

Has the Donkey Party actually been making progress towards these goals? I suppose one way to do it would be to appeal directly the the wealthy, the only folks really affected by the income and property tax cap. You know, that group the party routinely castigates for not paying enough in taxes.

I love the irony...

Posted by: MM | Feb 4, 2018 9:34:28 AM

Do you seriously think there are enough Texas voters who are buying houses with more than $750,000 of mortgage debt on them? And if they are buying homes that expensive, do you think they aren't business equity owners with either dividend and capital gain income or K-1 income, that still get favorable rates, no thanks to Liberal desires to "tax the rich?"

Posted by: ruralcounsel | Feb 5, 2018 3:55:48 AM

MM, you're just a grump. We say it real loud, it can come true. All you have to do is believe. :)

Posted by: Dale Spradling | Feb 5, 2018 7:57:19 AM