It’s hard to know exactly what shape Republican “tax reform” will take. Many details are missing from the “framework” that the administration presented last month. (Describing actions, or promises of action, by the Donald Trump administration often necessitates the use of quotation marks.) But it must have seemed a good idea to someone to complement Trump’s culture war against liberals with a fiscal war.
The deduction for state and local taxes, which is targeted for extinction in the White House framework, is most valuable in states where income and property taxes are high, such as California and New York. That’s why ending it has been called a “tax attack on blue states.”
But it’s amazing how many Republican donors and voters live in such states. Trump lost California to Hillary Clinton by more than 3.4 million votes, a greater margin than her national popular-vote win. Yet Trump received more votes in California than he got in Alabama, Arkansas, Louisiana, Mississippi and West Virginia combined.
Americans Against Double Taxation — yes, there is already an organized lobby against ending the so-called SALT deduction — said that of the 20 districts nationwide with the highest percentage of returns claiming the deduction, nine have Republican representatives. New York alone sends nine Republicans to the House of Representatives, equaling the combined number of Republicans from Alabama and Mississippi. California sends 14.
Affluent taxpayers in California, New York and other high-tax blue states could see money lost in the SALT deduction repeal returned to them with the repeal of the Alternative Minimum Tax, which the White House framework also calls for. But few individuals are likely to do the math, many are likely to assume the worst, and none will know the final details of legislation that doesn’t yet exist. Arguably the chief perceived benefit of GOP rule to educated, affluent, white swing voters — lower taxes — is in jeopardy.
Trump’s open hostility to nonwhites has already made the demographic shifts in many Republican districts potentially more challenging. Representative Darrel Issa, for example, represents California’s increasingly Hispanic 49th congressional district. He won re-election in 2016 with 50.4 percent and a margin of a couple thousand votes. If Republicans follow through with elimination of the SALT deduction, affluent white voters in Issa’s district may also find a new reason for dissatisfaction.
According to a Los Angeles Times analysis, 46 percent of tax filers in Issa’s district use the SALT deduction, with an average deduction of $10,024. As the Times reported, repeal of the deduction “would hit especially hard in wealthier areas, some of which are on the exact turf Democrats are trying to win over in Southern California.”
Democrats need to win two dozen House districts currently held by Republicans to take over the House in 2018. One-third of the top targets are in California, where seven Republicans represent districts that were won in 2016 by Hillary Clinton, and two other seats are also on the Democratic Party hit list.
If you designed a policy to loosen the Republican grip on the party’s last batch of California House seats, you could surely do worse than ending the tax deduction for state and local taxes. “They continue to try to figure out ways to alienate California from the Republican Party,” said Democratic consultant Bill Carrick.
California, where every statewide office is held by a Democrat, is already hostile territory for Republicans. Carrick, a longtime adviser to California Senator Dianne Feinstein, thinks Democratic candidates challenging Republican incumbents have gained a ready message with the proposal to end the SALT deduction. “My gut,” he said in a telephone interview, “is they can make a pretty good case: Send them a message. Quit punishing California.”
Or as Feinstein herself put it to the Los Angeles Times, “I don’t believe California should suffer in order for President Trump to give tax cuts to the rich.”
The potential to use repeal of the deduction as a lever, in California and elsewhere, to flip the House to Democratic control seems fairly acute. House Republicans from vulnerable districts are already squealing, and Senate Finance Committee chairman Orrin Hatch is balking. Yet without the enormous revenue raised by repealing the deduction — more than $1 trillion over a decade — the Republican framework’s costly benefits to the nation’s wealthiest become even more untenable.
Given the stakes and complexity, and the Trump administration’s comical record so far at rounding up votes, it’s hard to believe this assault on Democratic-voting states will make it all the way to the end of the process. Presuming, of course, that unlike the effort to repeal Obamacare, the tax “reform” process ever reaches an end.
(Guest editorial: Francis Wilkinson writes editorials on politics and U.S. domestic policy for Bloomberg View. He was executive editor of the Week. He was previously a national affairs writer for Rolling Stone, a communications consultant and a political media strategist. Used by permission.)