The Democrats commonly advocate for tax cuts for the working class but this time some Democratic states are going against their norm to detest the Republican tax overhaul brought into action in December 2017 and states that state residents will have a $10,000 cap on deductions for both the state and local taxes. The small group of Democrat leaders is calling for a reprieve on their states’ wealthy residents.
States such as California and New Jersey are involved in a legislative workaround in a bid to reprieve their wealthy from the new Republican tax overhaul. The move is common with high-income, high tax states that apparently need policies that will spare their residents the pain of the new $10,000 cap. Other states with a similar thinking to apply the same workaround bill are Connecticut, Maryland, Rhode Islands and the District of Columbia. Connecticut, New York, and New Jersey are planning to sue the federal government over the new cap.
The Argument behind the Resistance
Supporters of the resistance say that the cap on local and state tax deductions unreasonably affects Democrat-controlled states thus raising the cost of living. They claimed that the tax deduction caps could influence wealthy individuals to move to other states not affected by the cap. In California, Kevin de Leon, the President’s Pro Tem and a Democrats support the workaround bill in California. He stated that the state budget may take a big hit especially when wealthier residents decide to flee the state. He explained that it is the wealthy residents of California who pay the bulk of the taxes. Kevin added that their state had to offer services like schools, resources for senior citizens with Alzheimer’s and healthcare and the wealthy exodus may interfere with their programs.
In New Jersey, The Governor’s (Phil Murphy) office described their push for a workaround bill as a move of fairness given the fact that most federal tax breaks expire in the year 2027.
The Argument against the Resistance
Republican critics against the Democrats’ move advice that the states should be reassessing their taxes instead of seeking a workaround against the new tax cap on deductions. A contingent of the Republicans including John Moorlach agrees that the higher the local and state taxes on an individual, the bigger their benefit in terms of federal deduction hence the wealthier will be benefiting more from the tax cap on deductions.
In other words, the Republicans state that the new law caps the deduction as well as lower the tax rates. The spectacle is therefore expected to reduce the tax bills for the majority of Americans with the biggest beneficiaries being wealthy.
