ANALYSIS: Repealing State and Local Tax Deduction Could Turn More Blue States Red

Congress may end or limit the state and local tax (SALT) deduction as part of the tax reform bill now working its way through the legislative process.

If that proposal remains in the final bill when it is passed, it could trigger a political revolution in the liberal coastal “blue” states, similar to the changes that have rocked the upper Midwest in the past few years over taxes and public sector unions.

High earners are expected to leave high-tax states — if not physically, then at least legally, as they change domiciles to low-tax states and territories. Democrats as well as Republicans will be making the move.

Among the taxpayers who remain, however, there will be a new constituency for state and local tax cuts once those costs can no longer be written off and spread around to the rest of the country via the SALT deduction.

Wealthy voters — including those in high-end suburbs that have trended Democratic for the last two decades — will begin to scrutinize more closely how their state and local governments spend their money.

They will demand cuts to wasteful programs, and they will push for tax cuts to make up for the lost income they must now transfer to the IRS.

The political fallout might depend on which effect would be greater — the loss of potential Republican voters through migration, or the creation of new Republican voters through taxation.

But Republicans who have despaired of winning statewide in places like New York and California could see a revival of their political fortunes.

For the past several years, blue states have put up with higher and higher levels of taxation. But with California voters, for example, already expressing their outrage at Governor Jerry Brown’s new gas tax, repealing SALT just might bring blue-state Republicans back to life.

Joel B. Pollak is Senior Editor-at-Large at Breitbart News. He was named one of the “most influential” people in news media in 2016. He is the co-author of How Trump Won: The Inside Story of a Revolution, is available from Regnery. Follow him on Twitter at @joelpollak.


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