No doubt Trump hails the Republican tax cuts as one of his great “historic” accomplishments – except that he had virtually nothing to do with it.
Trump was only the tool to implement the wet dream of Republicans because they see starving the federal government of revenue as a key step toward also dismantling the social safety net–so-called “entitlements” of Social Security, Medicare and Medicaid.
No other president has been that callous, corrupt, clueless or ignorant to fall for the scam.
A year later, the critics who warned that the $1.5 trillion tax cut would not result in more jobs, more investment and higher wages (except the Obama-era hikes to state minimum wage), but instead would result in stock buybacks (a record $1 trillion worth) and hefty dividends to appease shareholders while exploding budget deficit ($1 trillion) and national debt ($2 trillion) have been proved correct. As predicted, 83% of the $1.5 trillion giveaway went to the top 1 percent.
But Republicans weren’t content just to exacerbate the already dangerous and undemocratic level of income inequality (3 richest people in America own more wealth than bottom 50 percent ), worse than the Gilded Age. Instead of paying for the $1.5 trillion tax cut by eliminating loopholes like “carried interest,” the Republicans used “tax-reform” as a political weapon: capping SALT at $10,000 was aimed at hurting blue states (New York, New Jersey, California, Massachusetts), fomenting ire among citizens at good-government programs that blue states believe they should be providing residents.
This while the blue states subsidize the low-tax red states (which rank lowest in quality of public education and health care).
Indeed, New York is the biggest donor state in the country, sending Washington $35.6 billion more than it gets back in federal spending.
This week, Gov. Andrew M. Cuomo and State Comptroller Thomas P. DiNapoli reported that Personal Income Tax receipts took an unexpected $2.3 billion dive December-January (despite Trump’s trumpeting jobs creation and the low unemployment rate in face of his 35-day government shutdown), and, by all measures, a healthy state economy (a record 8.5 million jobs) with record low unemployment (Nassau County below 3 percent).
Similar revenue declines hit other states as well. “The states with the largest revenue decline in the country – New York, New Jersey, Connecticut, California, Massachusetts are all states affected by SALT,” Cuomo told NPR. While New York and Massachusetts are down 50%, Pennsylvania is only down 3 percent, Ohio 5 percent, Indiana is actually up and Wisconsin is flat. “You are seeing the states that are affected by SALT have a dramatic drop in revenue compared to the other states who happen to be Republican states that are not affected by SALT.”
“The federal administration’s SALT policy is an economic civil war that helps red states at the expense of blue states, and we are now seeing the potentially devastating effect of it in the form of significantly lower tax receipts,” Cuomo said. “These changes hurt our economy and make New York less competitive, and we will not stop ringing the alarm bell about this punitive policy until Congress reverses it.”
“The big drop in state revenues in January is the most serious fiscal shock our state has faced in years,” DiNapoli said. “Gov. Cuomo is right to get ahead of this issue and to fight the federal government’s unfair tax policies. The disruptive impact of SALT cannot be ignored. We are watching this revenue decline closely to determine how profound the impact will be on the budget picture. We must be wary as we move forward to finalize a state budget, and we need to shore up our rainy day funds in case a storm hits.”
New York’s tax code is highly progressive (a blue state hallmark). The combined state/local tax rate for high-income New Yorkers is the second highest in the country. The top 1 percent of taxpayer accounts for nearly half (46 percent) of state income tax liability.
More than 95 percent of the tax increase from SALT falls on the top 20 percent of taxpayers, who pay 87 percent of New York income taxes.
They noted that New York’s tax base is getting more diversified, however SALT impacts progressive tax policies disproportionately. SALT encourages high-income New Yorkers to establish residency in low-tax states, which would harm State revenues and impact critical funding for education, health care, infrastructure, and the middle-class tax cuts.
While other states have experienced the detrimental impacts of SALT, New York continues to feel the disproportionate effect of the deduction because:
• 52 of New York’s 62 counties have average SALT above $10,000.
• The average New York taxpayer has SALT deductions that are more than twice the $10,000 cap.
• New York has the largest percentage of taxpayers getting a tax hike of any state.
• New York represents 7.3 % of the pre-cut tax base but gets 5.1 % of the cuts, by far the worst relative share of any State.
The drop in tax revenues means that some of Cuomo’s most progressive Justice Agenda policies – the bold plans for infrastructure based on clean, renewable energy, for instance – may be derailed, despite the historic opportunity presented by finally having control of both houses of the legislature.
Cuomo has hardly been passive. In February 2018, he launched a Tax Fairness for New York Campaign to combat the anticipated impacts of the federal tax law. New York joined Maryland, New Jersey, Connecticut in a lawsuit challenging the constitutionality of SALT and moved to overhaul of the state tax code to decouple it from the federal government’s.
Now he is prodding the Democratic-controlled House to restore SALT deductibility.
“This is a dagger at the economic heart of Democratic states. We have a Democratic Congress…They should now say in a united voice — because it hurts every Democratic state. And they should play their cards, frankly, as adamantly as Trump played his. He is directly hurting their states and they should make fixing this at the top of the list. Because it’s unconstitutional. It is an economic civil war.”
