voters as possible. The design of the Founding Fathers was pretty clear – the federal government would have powers “few and defined” so that Americans could choose their legislative bliss. Which is what deduction of state and local taxes would at least encourage. This isn’t to say that revival of SALT would bring back the early 19th century in a states’ rights sense, but it would at least create incentives for states to do more for themselves, and for their citizens to be rewarded with a lower federal tax bill by virtue of their politicians taking back legislative and spending power. At present, the opposite is being encouraged... Right now, red states in particular are cheering one another on to see which can push state taxes the lowest (tax competition and all that). It sounds good at first glance. And even at second glance. Really, why should citizens of Texas, Florida, and Tennessee pay more federal taxes so that taxpayers in California, New Jersey, and New York can lower their federal tax bills? The arguments are always very compelling until it’s remembered that when it comes to federal tax collections by state, California, New York, Illinois, New Jersey, and Massachusetts are already No. 1, 3, 4, 6, and 9. Again, federal tax collections are made large by a tiny and very well-to-do portion of the total tax base. These individuals often reside in blue states. Republicans seem to want to penalize them... Some would call this class warfare. Put another way, the tax competition
Constitution wasn’t some inkblot. Rather, it was clear that the vast majority of legislating should take place in states. So let it happen. States are precisely where the government spending should be... And what about the deficits? Treasury debt is already $30 trillion and growing. Policies meant to reduce federal tax collections would make a bad situation worse, wouldn’t they? Quite the opposite, really... and for obvious reasons. Indeed, readers need only ask why the Treasury is $30 trillion in the red, but Russia is “only” out $190 billion. Is Vladimir Putin a closet Adam Smith? More realistically, the buyers of government debt don’t trust Russia’s economy enough in order to buy debt that is a purchase of future government tax collections. It’s all a reminder that U.S. debt is of nosebleed proportions not because of too little government revenue, but an obvious consequence of government collecting way too much. Investors are so confident in Treasury collections now and in the future that they’re willing to buy the debt at the lowest interest rates in the world. Investors wouldn’t be as sanguine if policy were more focused on pushing taxation and government spending back to cities and states. In short, full SALT deductibility would logically limit federal borrowing... Soaring revenues encourage it. After which, it’s worth pointing out what’s long been true: Conservatives prefer local government, states’ rights, and anything else that centralizes legislative power as close to
American Consequences
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