Mark Levin is dead wrong when it comes to preserving local tax deductions



On his show last night Mark Levin spent a lot of time arguing with callers over the fairness of being able to deduct state and local taxes. The new tax bill put a $10,000 cap on state and local tax deductions and Levin, who probably pays the top rate of 5.75% in Virginia (plus property taxes), which, given his income, amounts to a lot more than $10,000, feels it is unfair not being able to deduct such payments from federal taxes.

He points out that while someone making $100,000 in Maryland may pay lower federal taxes than someone making $100,000 in Texas, the Maryland taxpayer also has to pay a lot of state income tax that the person living in Texas doesn't.

What Levin rejects, however, is the argument that the person living in Texas is subsidizing the person living in Maryland. But it's true. The person living in Texas, who makes the same amount of income as the one in Maryland, is contributing more to the federal government. And that is what is unfair.

It doesn't matter that the person in Maryland is paying the same or perhaps even more taxes totally when you combine state and local payments; people in every state should contribute to the federal government in the same amounts if they have the same income. To do otherwise is a subsidy, because in order to sustain a 25% or a 28% rate the federal government is counting on more money from Texans and less from Marylanders. There, then, is your subsidy.

If Texans paid the same federal taxes as Marylanders the federal government would need a higher tax rate to make the same revenue. Levin makes the point that the federal government is a massive deficit spender which wastes money (all true), but doesn't dispute that at each level of funding that people in low tax states shoulder more of a federal burden. The fact that people in Blue States also pay state taxes has nothing to do with the principal of everyone making the same income paying the same federal rate, regardless of where they live.

Levin attempted to cloud the issue by saying that taxpayers could make a charitable contribution to offset their taxes and that is true, but that is a deduction that is not based on geography; it does not go to all Marylanders and zero Texans.

Levin surprisingly misses the strongest policy argument for not making state and local taxes deductible. By insulating taxpayers to a degree from federal taxes, Blue States have an easier time raising local taxes to fund their own income redistribution schemes. In fact now for the first time we are seeing pressure on Blue States to cap or lower their taxes because of the outcry over the sudden lack of deductibility of local taxes over $10,000.

Instead of condemning callers who call the deductability of local taxes arbitrary and unfair, Levin should realize that it's an issue of treating people in all states equally and applying pressure on states to lower taxes.

[originally in AT]



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