Varney’s warning to Democrats: Watch out, you may get what you wished for
Tax the rich! Oh, be careful, the president's middle class tax cut could become a tax package that hits rich Democrats.
Here's how it could work out: California, New York, Illinois...Three classic examples of Democrat states which impose very high taxes of their own. They tax high income earners to the max!
At the moment, those state taxes are deductible on the federal return. The rich, in those Democrat states, are cushioned. The state taxes they pay are not quite so bad because they get a break at the federal level.
Well, what happens if state and local taxes are no longer deductible? Thatâ€™s reportedly part of the middle class tax cut plan. Ouch. Suddenly, that big tax break disappears. And who gets hit the most? High tax states â€“ Democrat states.
Senator Charles Schumer (NY) and Representative Nancy Pelosi (CA) are in a bind: they want to tax the rich, but their own rich supporters? Nightmare!
Wait, it gets worse...while cutting the deduction clobbers high tax states, itâ€™s a big plus for low tax or no tax states, which are overwhelmingly Republican! Texas and Florida have no state income taxes! So ending the deduction is no big deal to them.
In just a few weeks, the president has put tax reform front and center and set himself up for victory without the Republicans.