Taxes

CA Dems Shoot Themselves in Foot With Big Tax Burden

One million Californians are projected to fork over an additional $12 billion by Tax Day 2019.

Jordan Candler · Apr. 18, 2018

Roughly a million Californians will find this week’s tax filing deadline far more benign than next year’s, even though most other Americans will find the opposite to be true. What explains this dichotomy? Changes to the deduction for state and local taxes, or SALT, courtesy of Republican tax reform.

Based on numbers crunched by the Franchise Tax Board, one million Californians are projected to fork over an additional $12 billion by Tax Day 2019. But here’s the irony — it’s the affluent who will feel the biggest impact. As The Sacramento Bee reports, “Very wealthy Californians earning more than $1 million a year will pay the lion’s share of that money, with 43,000 of them paying a combined $9 billion.”

Granted, “About 751,000 households with incomes under $250,000 probably will owe more tax,” according to the Bee. “All together, they’ll owe an extra $1.1 billion.” Still, millionaire earners will be disproportionately affected. A $1 million income might not necessarily represent a lot of money in California, given its exorbitant cost of living (see below), but in many states that’s a fortune. And many of the Californians hit with additional taxes make far more than that. Meanwhile, the Bee says that “most Californians should see a tax cut.” So why aren’t Democrats rejoicing in the fact that “the wealthy” will be paying their fair share?

Here’s why: Because last year’s tax reform “is a dagger aimed at the fiscal heart of high tax blue states like Illinois, Connecticut, California, etc.,” writes Steven Hayward, who reminds us that Democrats were able to avoid SALT changes during the Ronald Reagan era. That didn’t happen this time around, though, because Democrats played the “resistance” card. “If even 10 Senate Democrats had been willing to play ball with Republicans on the tax bill,” says Hayward, “they could have mitigated this blow.” But then they wouldn’t have a campaign issue to Demo-gogue, now would they?

There’s nothing fair about SALT deductions. As Ed Morrissey explains, “The ‘progressive’ income tax used taxes paid by people in low-tax states to repay the wealthy for their taxes in places like California. The SALT deduction really only comes into play for people who can itemize enough to outstrip the standard deductions, so its benefit plays mostly to the wealthy anyway. It also plays mostly to the benefit of a very few states. California and New York taxpayers soak up almost a third of all benefits from SALT deductions.”

Furthermore, says Morrissey, “Next year, taxpayers in California, New York, and other high-tax states will have to truly pay for their own taxes rather than foist them off on everyone else. When that happens, will high tax rates be politically sustainable? Will the political party that insists on the rich ‘paying their fair share’ celebrate the impact of the rich actually paying their fair share? Probably not, which is the real reason Democrats are running on the repeal of the tax cuts.”

Democrat Minority Whip Steny Hoyer recently stated, “I think certainly we’ll look to have revenues as opposed to simply creating more debt.” Translation: The “crumbs” benefiting most Americans will eventually be swept back together and given to Uncle Sam, assuming Democrats take control of Congress. But make no mistake: Abolishing tax reform is really the Democrats’ way of continuing to subsidize the wealthy — for instance, by fully restoring SALT. Which is completely antithetical to their stated platform and contradicts the accusations they perpetually toss at Republicans. Talk about mixed messaging.

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