What's this? Democrats trying to help the 1%. The left, having bashed the rich for years, now turns around and defends them?
Continue Reading Below
Yes, it’s true. But this requires some explanation.
Democrats in California and New Jersey want to convert state and local taxes into charitable contributions.
There's a switch! Under the new tax law, local taxes are not fully deductible. So in high-tax states, such as California and New Jersey, the 1% will be paying a lot more. The Democrats take one look at that, and they instantly realize they've got a problem. Because, the rich can move. And take their money with them. It’s happened before in Maryland; the state imposed a millionaires' tax. Many of those millionaires promptly left. Maryland lost money!
It’s not that Democrats suddenly love the 1%. Oh no, it’s their money they want – and need. California gets almost half its income tax revenue from its high-income earners. If even a few of them leave, California takes a huge financial hit.
Where would they go? How about Nevada – no state income tax there. Or for New Jersey and New York residents, how about Florida or Texas – no state income taxes there either.
This is what worries the Democrats who have been running high-tax states for years: the exodus of the rich.
But their answer to the problem surely won't fly. The IRS is highly unlikely to allow a tax to be converted into a charitable gift.
Bottom line: high tax states are stuck. They have only one option: cut their own taxes, and they will not do that!
The exodus of the 1% has already started. Looks like it will become a stampede.