The Democrats are hysterical about the Trump tax reform. Maybe you'd be hysterical too if someone was about to blow up your little kingdom.
For years, high-tax states benefited by passing the cost to the rest of the country, or allowing their residents to "write off" their state taxes on their IRS return.
In other words, the real losers of Trump tax reform are the state legislatures in California and Illinois, as we see in this article by James Piereson:
The new tax legislation approved this week by Congress and to be signed by President Trump includes a provision that will cap the deduction for state and local taxes (SALT) at $10,000 per household. (Businesses will still be allowed to deduct those taxes as business expenses.)Correct! The "blue model" will now require its citizens to pay the real cost of government. My guess is that you will see an exodus of taxpayers and businesses unless they change their approach to governing.
The other provisions of the tax bill—especially the corporate tax rate cut—should encourage investment in the United States and spur faster economic growth.
But the cap on state and local deductions may be the most significant in terms of its potential political consequences.
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