Columnist: Blue States Will Need To Cut Taxes To Compete With Red States

Megan McArdle is one of those rare writers who truly plays it down the middle, politically. In a new column, she offers some tough news for blue states. When it comes to tax reform, they are going to have to make some changes to remain competitive.

She writes at Bloomberg:

Sorry, Blue States: You Can’t Fix the Tax Bill

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It’s an unhappy time to be a high-income professional in a blue state — or their governor. The new tax law, which caps the deduction for state and local taxes at $10,000, amounts to a roughly one-third increase in their effective state-and-local tax rate. That will be an ugly hit to the pocketbook.

They will fiercely resist any attempt to raise taxes further, bad news for mayors and governors who are often facing big pension holes that are eventually going to need to be filled with taxpayer money. Worse still, they will probably put pressure on said politicians to lower taxes. And some of them may start shopping for residences in lower-tax locales, taking their valuable, taxable incomes with them if they go.

Small wonder that officials in high-tax states are desperate to find some way to undo what congressional Republicans have wrought. A number of proposals have been floated in the last month, all of them interesting, none of them likely to work very well.

Will any blue states take her advice? Stay tuned.

 

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