Starving the Beast (MR)

Starving the Beast (MR)

Tax season is upon us again. Last year’s Trump tax cut for fat cats also ended several tax breaks for slimmer cats (making them slimmer still!) One major change was that one could no longer deduct state (and local) taxes.

That was a piece of retaliation against high tax states, i.e. liberally inclined states. The more a person paid in state taxes, the more that was allowed to be deducted on the Federal return and thus the taxpayer got a break.

The conservative objection to that long-standing provision is a piece of psychology: if an individual in a high tax state can write off the taxes, the person will not object (enough) about the taxes she/he are paying and so the state will continue excessive (for the conservative) taxes. Ending the deduction for those taxes will increase public pain and thus increase the clamor for less taxes – and so we will be starving the beast and the size of government will shrink. In short, the provision in the Trump tax bill is part of the general conservative aim of having the smallest possible government.

Of course, the good that the government will do with the tax monies to be taken away is completely ignored: low taxes outweigh to the conservative mind any good that public policies could conceivably produce.

Let us suppose the conservative psychological principle is true. What liberal (‘tax and spend’) states need to do is to convince low tax states, that if they can help reinstate the provision that state taxes can be written off one’s Federal tax bill, then those states can raise their taxes and their citizens won’t object nearly as much. And then the low tax states will also have improved government services without too much complaining.