Tag Archives: state taxes

The Problems With The Harris Tax Plan

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Kamala Harris will raise our taxes if she is elected. She says she will only raise taxes on the rich, but that was the same promise made when the Income Tax was passed in 1913–it would only impact the top 1 or 2 percent of the wealthiest Americans–the rest of us would not have to pay any taxes. We know how that went.

On Friday, Townhall posted an article about Kamala Harris’ tax plan.

The first thing you need to be aware of is the Laffer Curve:

It has been proven historically that lower taxes result in higher tax revenue. Why should you take the risk and do the work of starting a business of  you know the government is going to take most of what you earn?

The article at Townhall states:

Experts are warning against Vice President Kamala Harris’ proposed tax strategy, which they say would threaten the future of the United States economically.

The Cato Institute commented:

Harris’s 28 percent federal corporate tax rate and 44.6 percent top capital gains and dividend tax rate would give the United States the highest total tax rate on corporate income in the developed world when combined with state taxes. As I recently explained, workers ultimately bear most of the cost of the corporate income tax through lower wages and fewer job opportunities. Because the corporate income tax is one of the most economically destructive ways to raise revenue, the total economic cost of Harris’ proposed tax hike will likely be multiple times larger than the tax revenue it raises. The Harris plan would also increase top federal income tax rates so that combined state, local, and federal tax rates would be on the wrong side of the Laffer curve in 36 states and Washington, DC—the point at which higher tax rates create so much economic distortion that they no longer bring in additional tax revenue. Via Cato Institute.

I would like to continue to live in my house as a senior citizen on a fixed income. Harris’ plan to tax unrealized capital gains would make that impossible.

Fighting Back

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Yesterday Trending Politics reported that 13 states are suing the Biden administration because of the clause in the Covid Relief Bill that prevents states from lowering taxes if they receive aid.

The article quotes The Daily Caller:

The Daily Caller reports: “The 13-state coalition argued that the provision included in the Democrats’ $1.9 trillion coronavirus relief package preventing states from cutting taxes if they accept relief from the federal government is unconstitutional. The coalition, led by Republican West Virginia Attorney General Patrick Morrisey, filed the federal lawsuit Wednesday evening in the U.S. District Court for the Northern District of Alabama.”

In a statement released on Wednesday, Morrisey said, “Never before has the federal government attempted such a complete takeover of state finances. We cannot stand for such overreach.”

…The lawsuit explains that the tax provision is “one of the most egregious power grabs” in U.S. history, adding that the Tenth Amendment doesn’t allow the federal government to stretch their authority like the Biden Administration is doing.

The lawsuit is needed. The provision in the bill is definitely government overreach.

Voting With Their Feet

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Yesterday The New York Post posted an article about what is happening to the cost of living in New York City.

The article reports:

More than a third of all city residents say they can’t afford to live anywhere in the state — much less the Big Apple — and believe economic hardship will send them packing in five years or less, according to a dismal new poll.

That’s 41 percent of city dwellers who say they can’t cope with New York’s high cost of living, according to a Quinnipiac poll published Wednesday.

Separately, 41 percent fear they’ll be “forced” to pull up stakes and seek greener pastures where the economic climate is more welcoming.

“They are making this city a city for the wealthy, and they are really choking out the middle class,’’ said Ari Buitron, a 49-year-old paralegal and born-and-bred New Yorker from Forest Hills, Queens.

The cost of taxes and housing have driven many residents south:

Even well-heeled New Yorkers are being lured down south thanks to New York’s hefty tax burden and new federal tax policies that punish high-tax states, according to Miami property magnate Gil Dezer.

“Because of the city tax and the non-deductibility of your real estate taxes, we’re seeing a lot more people with piqued interest,” he told The Post.

The poll’s findings reinforce research done by the Empire Center for Public Policy that shows that New York leads the nation in terms of residents jumping ship.

“It’s not surprising. The out migration downstate is first and foremost about affordability. Rent and property taxes downstate are very high,” said the Empire Center’s E.J. McMahon.

Right now, a very large percentage of Americans live in New York City and Los Angeles. If the electoral college were eliminated, these cities would essentially elect our President. However, if these cities continue to lose population, eliminating the electoral college, despite the fact that it would be a foolish move, might not have the effect those calling for its elimination desire.

How Much Does It Cost?

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The Daily Signal posted an article today about single-payer health care. This was one of the signature issues of the Bernie Sanders’ campaign for President and is still being considered in some states.

The article reports:

Earlier this year, Sanders introduced a big and comprehensive “Medicare for All” proposal that would create a government-controlled health care system at the national level. The plan has gained momentum among Senate Democrats, but has also slammed into a fiscal reality check.

Three independent estimates from a diverse range of health care economists and policy analysts have highlighted the enormous additional cost of Sanders’ proposal. The liberal Urban Institute estimated that the 10-year costs would amount to a stunning $32 trillion, while the conservative Mercatus Center at George Mason University put the cost at $32.6 trillion.

Professor Kenneth Thorpe of Emory University, a former adviser to President Bill Clinton, used a different set of assumptions and set the 10-year price tag at $24.7 trillion.

Charles Blahous of the Mercatus Center said his own $32.6 trillion estimate made generous concessions for the purposes of calculation, and he accepted Sanders’ assumptions that the proposal would also generate savings, such as massive payment reductions to doctors and other medical professionals.

Blahous added that more realistic assumptions underlying estimates of the Sanders legislation would likely push the total taxpayer price tag even higher than $32.6 trillion.

The article mentions what has happened to state efforts to institute single-payer programs:

Officials in Sander’s home state of Vermont tried to make their state the first in the nation to create a “single payer” health care system. The ambitious proposal died after the costs were made known. According to an official state analysis, the proposal would have cost a total of $4.3 billion, with the state cost reaching $2.6 billion. As The Boston Globe noted, the entire Vermont budget in 2015 was just $4.9 billion. The state would have to increase the state personal income tax to 9.5 percent and add an 11.5 percent payroll tax.

Same problems with Colorado. Voters overwhelmingly rejected a Colorado ballot initiative to create a government-controlled health care system. That’s no surprise. According to an independent analysis, the proposed program, funded by an increase in state taxes, would still run an estimated deficit of $7.8 billion by 2028.

Even liberal California legislators have struggled to advance a “single payer” program. Their proposal has stalled, lacking the necessary legislative support. Again, this was not surprising given the cost. A California State Senate report concluded that the cost would total $400 billion and the state would have to raise $200 billion in new taxes.

There are things to consider other than cost. People in countries with single-payer often come to America for health care–it’s not that we are cheaper–we are not–but health care is available here. In Britain, people sometimes wait more than a year for heart surgery. Often they die while waiting. The free market works–even in health care. If America wants to improve its health care and reduce the cost, it needs to introduce the free market. That means getting rid of over-regulation by the government. There should be basic safety standards imposed by the government, but that should be the end of it. The free market works.

The Definition Of Serendipity

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Serendipity means a “fortunate or happy unplanned coincidence”. We may be seeing an example of that concept in one of the unintended consequences of the recently passed tax bill.

Yesterday the Associated Press reported the following:

In New Jersey and California, top Democratic officials want to let people make charitable contributions to the state instead of paying certain taxes. In Connecticut and New York, officials are exploring a switch from income taxes to new ones on payroll. A few governors have even called for tax cuts.

The ideas are bubbling up as state lawmakers begin their 2018 sessions and assess the effects of the Republican tax overhaul that President Donald Trump signed into law last month. Lawmakers and governors in some states are grappling with how to protect their constituents.

Loosely translated this is what is happening as a result of the fact that states with low state taxes will no longer be subsidizing states with high state taxes. Under the current plan, if your real estate taxes were $20,000 a year, which is not unusual in New York, Connecticut, New Jersey or California, you knew you could deduct them on your federal income tax, so it really wasn’t that important to you. Now those deductions will be limited to $10,000 and you will still have to pay the balance to your state.

No one likes it when their gravy train is cut off.

The article further reports:

This week, New York Gov. Andrew Cuomo used his state-of-the-state speech to pledge to sue over the GOP tax plan, which he called “an assault” by the federal government. A lawsuit would add taxes to the growing list of Trump administration policies that Democratic states have challenged in court.

Other states have not committed to sue, but some leaders have indicated they’ll explore the idea.

“I’m certainly not a constitutional lawyer, but the notion that this is not constitutional is something we want to pursue,” said Phil Murphy, New Jersey’s Democratic governor-elect.

Officials in California and Connecticut also said this week they were considering legal options.

In high-tax states, officials have been focused on protecting taxpayers from the impact of a new $10,000 cap on deductions for paying state and local taxes. In California, Connecticut, Massachusetts, New Jersey and New York, more than one-third of tax filers claim the state and local tax deduction on federal taxes; the average deduction in each state is over $15,000.

The Constitution gives Congress the right to levy taxes. Good luck with your lawsuit.

It is remotely possible that fiscal responsibility may be forced on some of our high-taxed states. When you consider that the Founding Fathers saw each state as a laboratory to experiment with unique ideas, it becomes obvious that some states did better than others in controlling expenses. Those states which controlled expenses have been subsidizing those that spent wildly for years. It is nice that things are changing. Now the governments of those states who have overspent need to change.