An idea for tax reform from one of my smartest readers

This has been a pleasantly busy weekend (if you discount the fact that I tried to shave part of my finger off with a kitchen knife — but it’s all good, thanks to having one of those first aid powders that stops bleeding), but it was also a weekend that precluded blogging. However, because my readers are the smartest people around, here’s an idea from Danny Lemieux:

The Progressive states want to reform the tax laws in order to restore the un-capped deductions for state taxes and, in effect, have the rest of America subsidize their deficits. They want to make this a big issue this coming November.

What if…Trump promoted a tax reform that allowed only the residents of said State to make tax-deductible contributions to their own states earmarked for deficit reduction (i.e., deductible similar to charitable deductions). This would basically call Schumer’s and Nancy’s bluffs. It would also:

a) expose the fact that Progressive blue-state residents aren’t particularly interested in “donating” toward fixing their own Progressive state finances.

b) starkly expose Chuck and Nancy’s agenda to get OTHER states’ citizens to subsidize the Progressive states’ profligacy. For what other reason could they possibly object to such a solution?

If I have thought this out properly, I think that this could be a great issue to hammer leading up to the election.

Assuming I understand Danny correctly, this is how it would work in California: Before the Trump tax reforms, although Californians paid the highest (amongst the highest?) state taxes in the U.S., they could offset that tax by deducting it from their federal taxes. In other words, the taxes they paid to California, and that were poured into California’s coffers to pay current operating expenses, were treated as a charitable deduction for purposes of filling out their federal taxes. By decreasing their federal taxes, it shifted more of the federal tax burden to taxpayers in other states who, by virtue of having lower state taxes, couldn’t deduct as much.

What Danny is suggesting (I believe) is that the only time Californians can deduct from their federal tax returns any payments that they make to their own state is when they explicitly earmark those payments as a donation to pay down their own state’s deficit. Danny believes, and I bet he’s right, that most people will not donate to their state’s deficit, even if it means a tax deduction.

Image: (cropped)