(National Sentinel) Tax Reform: Democrats are crying foul after the GOP unveiled its initial tax reform proposal Thursday, claiming Republicans crafted a plan that essentially punishes voters in blue states.
The bill aims to slash deductions for state and local tax deductions as part of the GOP’s plan to pay for tax reductions elsewhere. Reuters claims that overall the bill would reduce federal revenues by about $1.5 trillion over a decade, though that estimate likely does not include estimates of tax revenue increases thanks to a better economy.
As Reuters noted further:
The bill eliminates the most widely-used deduction – income tax – and caps property tax deductions, the second most-used, at $10,000. State and local deductions are used largely by high-tax states that tend to vote Democratic in presidential elections and local officials say the tax bill appeared to divide its benefits and burdens along partisan lines.
“I do think this has been developed in a way that looks at who were the prevailing forces in the presidential election and who were not,” Kevin Sullivan, Connecticut’s Commissioner of Revenue Services, told the newswire service.
Among those potentially hardest-hit are California and New York with state income tax rates of 13.3 percent – the nation’s highest – and 8.82 percent respectively, according to a recent report by the Tax Foundation.
Connecticut, like many blue states, has some of the highest state and local tax rates in the country. Backers of the GOP tax plan noted in response to Democratic charges they are being targeted that Republicans have not been responsible for boosting tax rates in Democrat-run states over the years.
Democratic politicians in those states, they argue, knew that no matter how high they raised rates, taxpayers would be compensated at the end of the year by being able to take state and local taxes off their federal returns.
“By eliminating or rolling back state and local tax deductibility, Washington is sending a death blow to New York’s middle class families and our economy,” New York Governor Andrew Cuomo, a Democrat and one of the most outspoken opponents of the bill, wrote in a letter to Trump this week. “It’s clear this is a hostile political act aimed at the economic heart of New York.”
While that’s not at all clear what the GOP plan seeks to do, despite Cuomo’s hyperbole, there is nothing stopping Democrats in high-tax states from passing legislation lowering their top rates, argue supporters of the plan.
Conservatives approve of the measure.
“The principles outlined in this federal tax reform effort will provide pro-growth tax rate reductions, while adding fairness and simplicity to the tax code,” Jonathan Williams, chief economist at the American Legislative Exchange Council, an organization of conservative state legislators, told Reuters in an email.
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