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Tax the Poor?

After the election in 2004 one of the first priorities George Bush announced for his second term was tax reform, and he very quickly put forth some proposals which included, among other things, the elimination of deductions for state and local taxes in calculating the federal tax obligation.

Michelle Goldberg of Salon.com immediately published a diatribe condemning the proposals — the elimination of local and state tax deductions in particular — as unfair to “the poor” and a boon for “the rich” and implying that, because the proposals would result in some tax burden being shifted from “red” states which voted for Bush to “blue” states which voted for Kerry (or, as I point out, from poorer states to wealthier states), that it was intended as political payback, as a reward for states which voted Republican and a punishment for those which voted Democratic.

This was my response to Goldberg and Salon. It was not published.

22 November 2004

There may be much to criticize in the administration’s new tax proposals (and I know I would certainly feel them in my checkbook if they were to pass), but I find Michelle Goldberg’s outrage a bit disingenuous.

She complains that, under the proposal, the ‘blue’ states will bear even more of the tax burden than they do now, to the benefit of the ‘red’ states. But she ignores the primary reason for that: the ‘blue’ states tend to be wealthier than the ‘red’ states. If California and New York are sending more to Washington than Montana and Alabama it is because they have generally higher salaries and higher standards of living. One would think that both Goldberg and the Salon editors — who have been advocating “soak the rich” tax policies and a redistibutionist vision of federalism for as long as I’ve been reading Salon — would feel good about any scheme that seems to further that strategy.

Similarly, by eliminating deductions for state and local taxes in federal tax calculations, it would seem the biggest losers would be those who pay the most in state and local taxes (meaning property and income taxes; sales taxes are not generally deducted) — those with the most income and property subject to taxation and those who earn enough money to bother to file itemized deductions. In other words: “the rich”.  Again, I would expect Goldberg and the Salon editors to be rejoicing.

As a final matter of simple fairness, why should we exempt some people from their responsibility for funding national priorities just because they’ve chosen to spend extra money on themselves at home? That is what deductions for state and local taxes do — they reduce the obligation to support federal spending based on support for state and local spending. On its face that would seem to fit a ‘conservative’ agenda — keep the money local and locally controlled — rather than the good ‘liberal’ agenda generally favored at Salon of centralizing all spending in Washington.  Again, what is the complaint?

There may be aspects of the new tax proposals that would shift tax burden from rich to poor, but the elimination of deductions for state and local taxes would not seem to be among them. Could it be that the primary outrage is not with the plan itself but with the fact that George Bush and the Republican Congress are the ones who get to propose it?

© Copyright 2004, 2005, Augustus P. Lowell

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