Opinion

Blue-state tax blues

Even if we win, we lose.

We’re talking about federal tax reform, and what it would mean for taxpayers in New York, New Jersey and Connecticut. Today, the federal tax code gives us a break by allowing us to deduct our high state and local taxes.

That’s likely to change if Washington gets serious about tax reform. Because reformers are gunning for this deduction. They see it as a subsidy by states that tax and spend less to states that tax and spend more. And they are right.

We see this logic in the comprehensive tax reform just unveiled by Michigan Rep. Dave Camp, the Republican chairman of the House Ways and Means Committee. It has many differences from, say, the reform introduced back in September by Utah Republican Mike Lee. The one thing they have in common is that each would eliminate deductibility for state and local taxes.

Over at PublicSectorInc.org, Steve Eide points out that this is almost inevitable, because dropping rates requires finding revenues somewhere else. That means going after the largest exemptions and deductions — one of which is the federal deduction for state and local taxes.

In other words, even if federal taxes were simplified and flattened, taxpayers in the tri-state area would come out losers because we could no longer deduct our New York, New Jersey or Connecticut taxes.

Eide says this explains why blue states are hopelessly wedded to the complex status quo. We agree. If blue-state citizens are to benefit from federal tax reform, they need to pressure their pols to put their own financial houses in order first.