Surprise: Mark Levin supports deductibility of state and local taxes from federal taxable income
On his show last night, Mark Levin, whose work I usually greatly admire, spent a lot of time arguing with callers over the fairness of being able to deduct state and local taxes. The new tax bill puts 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, probably amounts to a lot more than $10,000, feels that it is unfair not to be 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 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. That is what is unfair.
It doesn't matter that the person in Maryland is paying the same or perhaps even more in 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 with the SALT deduction, the federal government takes more money from Texans and less from Marylanders with the same income. There is your subsidy.
Levin makes the point that the federal government is a massive deficit-spender that wastes money (all true) but doesn't dispute that at each level of funding, 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 principle of everyone making the same income paying the same federal rate, regardless of where any given person lives.
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 deductibility of local taxes arbitrary and unfair, Levin should realize that it's an issue of treating people in all states equally and applying pressure to states to lower taxes.
Ed Straker is the senior writer at Newsmachete.com.