The Tax Bill And The High-Tax States

     I suppose this was to be expected:

     Governors of three high-tax states said Monday they’re considering suing to stop the GOP-backed tax overhaul that limits deductions for state and local taxes.

     “We are looking at the legality now. This is double taxation. They are taxing the taxes,” said Gov. Cuomo during a conference call with California Gov. Jerry Brown and New Jersey Gov.-elect Phil Murphy.

     “This is from the party that is against taxation. This takes from the richest states and has them subsidize a tax cut for the less wealthy states. It may well be illegal and unconstitutional.”

     Any number of other federal policies that created tax-system-enabled transfers to the high-tax states evoked no protest from those states, back when. But it’s a bit like the joke about the laborer who found an extra dollar in his pay envelope one Friday and said nothing to anyone about it. On the subsequent Friday, his pay envelope was short one dollar...so he went to his supervisor and complained.

     The supervisor cocked an eyebrow and said, “Last week you received a dollar too much. Why didn’t you say anything then?”

     The laborer drew himself up to his full offended dignity. “One mistake, I can overlook,” he said. “But not two.”

     Should Cuomo et alii elect to sue the federal government over the bill, I predict vigorous forum-shopping and copious media bloviation.

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     Yes, the tax bill will negatively impact two groups of Americans:

• Earners in high-income-tax states;
• Homeowners in high-property-tax states.

     I’m one of each. I’ll take a hit, possibly two or three thousand dollars’ worth. But the correction of incentives is necessary. Indeed, it’s long overdue.

     The political dynamic has a lot in common with the behavior of predators of all kinds. As I wrote in Which Art In Hope:

     “Now, we know from historical data that predators of all sorts will concentrate where the prey is fattest. The State, which is merely an organized band of predators with a veneer of legitimacy derived either from tradition or from a manufactured appearance of the consent of its subjects, took a huge fraction of its subjects’ annual production from them in taxes.”

     (The lecturer who said that to his students, Arne Stromberg, holds the Edmond Genet Chair in Sociology at Gallatin University, one of the most prestigious institutions of higher learning on Hope, so you should give his views respectful consideration.)

     New York, California, Illinois, and New Jersey have crushing tax rates because several decades ago, political predators noticed that the residents of those states had higher incomes than the residents of other states. That created an incentive for those predators to flock to those states and worm their way into politics there. Within each of those states, the most voracious predators are usually found in the large cities, where the pickings are geographically concentrated and the conditions of life compel the centralization of important facilities. (It also helps that the media in large cities can easily be bought off, for reasons beyond the scope of this screed.) As the large corporation assumed economic dominance over the family business, the pursuit of one’s chosen trade led to a reduction in mobility, especially among senior and middle-aged workers. That worked to pin the “prey” in place.

     The federal government should never have collaborated with the state governments to subsidize the states’ predations via the federal tax system. The incentive for it grew as income tax rates rose, particularly during the New Deal years. Making state and local taxes deductible on one’s federal return helped Franklin D. Roosevelt to purchase the support of the states with the largest number of electoral votes.

     But what’s of greater import at this time is whether Cuomo and his High-Tax Comrades can find a federal judge willing to allow their suit.

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     These days there isn’t much that can’t touch off a lawsuit. State governments don’t often sue Washington, but there are precedents for it. Should the bill reach President Trump’s desk in something close to its current form, I predict that Cuomo, Brown, and Murphy will sue over it.

     They’ll need a Clinton or Obama appointee to allow the suit to move forward. Nothing in the Constitution requires that Washington make any provision whatsoever for state and local taxes in its own tax systems. Thus, a judge who aced “Straining at Gnats and Swallowing Elephants” in law school and is politically aligned with the leftmost of the Left must be found. Unfortunately, there are plenty of them. However, should the suit survive to reach a federal appeals court, I’m confident that it would be dismissed with prejudice.

     Yes, the tax bill will hit me in the wallet. Still, it’s high time the high-tax states had some clamps put on their jaws. A great part of the reason those states have had trouble retaining young people lies in their tax systems, which make it very difficult to pursue the first years of one’s career there...unless you’re a lawyer or a politician, at least. Without young people a locale tends to ossify, both socially and economically. It doesn’t take long for extortionate taxes to reduce an economically vital region, as Long Island once was, to a retirement community.

     Therefore, it’s time to “take one for the team.” I hope other conservatives in situations such as mine will see it the same way.