The candidacy of Bernie Sanders was annoying for many reasons, but one of the most annoying was the fan base known as “Bernie Bros.” Driven by the politics of envy, this group ran around screaming that the top 1% needed to pay their “fair share.” Never mind that the top 1% is already soaked with tax payments, and pays a disproportionate share of federal taxes. The solution for Bernie Bros is always that someone else pays more. In the end, they are driven by a socialistic mind set, fueled by envy: they resent what you have and they want it taken away, even if it won’t help them.
This kind of attitude is awful, right? The politics of envy is ugly and to be avoided, right?
Want to see the politics of envy, Mr. Small-State Republican?
Go look in the mirror. You are the very face of spiteful envy, wanting others to be hurt even if it doesn’t help you.
I wrote a long post yesterday about the elimination of SALT deductions, which is going to slam the professional class in large states to the tune of thousands of dollars a year. I made the moral case for why SALT deductions are good policy, as they prevent one sovereign from taxing money already pledged to another. And I responded to many of the counterarguments — not that anyone really paid attention.
In response, in comments and on Twitter, a bunch of people asked why they should “subsidize” California’s high-tax environment with the SALT deduction.
That claim is wholly illogical, on several levels.
First, since when did Republicans use the language of spending to describe tax relief? The definition of a “subsidy” is “a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.” Allowing me to keep my own money is not a “grant.” It is not money being “paid” by the government. It’s my money. Republicans used to understand this.
But more fundamentally, this “subsidy” argument treats the government as if its expenses are a restaurant bill, that has to be paid when it comes due. Imagine you’re at a restaurant with co-workers. The check comes. That check has to be paid and it has to be paid now. If you start whining about how you didn’t eat the appetizer and ordered one less drink, and you chip in less money, now I am going to have to pay more.
But that’s not how the federal government budget works. Federal taxation, I think we can all agree, is not a pay-as-you-go scenario. The federal government does not compute its costs for the year and then distribute a bill to the public at large based on what the expenses were.
As a result, there is no direct causation between my deduction and your being forced to pay more. Finding an indirect causation — declaring that you have to pay more because I pay less (than the huge amount I would otherwise pay) — depends on a Rube Goldberg chain of events and calculations so long and fanciful that you’ll become impatient just reading the sentence describing it.
Here’s how to calculate the amount of extra tax you suppose you are paying because we have a SALT deduction that benefits higher-tax states more than lower-tax states: you have to calculate the difference between what low-tax states are allowed to deduct (you know you guys have property tax and sales tax deductions, right? Well, include those in the calculation) and then subtract that from what higher-tax states are allowed to deduct (if you live in a state with no income tax, make sure also to subtract from this latter figure the amount that we Californians ought to be able to deduct in sales taxes but (unlike you) cannot deduct because the IRS forces us to choose between state income tax deductions and sales taxes deductions — a choice you, as a member of a state without income taxes, are not forced to make); calculate the savings based on that difference; then assume that lawmakers also calculate that amount and recognize it to be a shortfall in what they could be getting; then assume that instead of simply adding that amount to the debt, they instead decide to adjust rates upward to make up for that shortfall and that shortfall alone; or, alternatively, assume that they raise rates due to a total shortfall of which this shortfall is only a part, in which case you now have to determine what the total shortfall is that motivated them to raise rates, and then calculate the percentage of that shortfall attributable solely to the extra amount they would have gotten from high-tax states over and above what they get from low-tax states (again remembering that many of you can deduct higher property taxes than I can and can deduct sales taxes that I can’t); then you look at the amount that your taxes were raised, and multiply it by that final percentage to determine the amount of extra taxes you had to pay.
Got that? Whew!
All of this depends on 1) lawmakers being responsible in two separate ways: a) not passing shortfalls on to future generations (ha!) and b) adjusting rates, not according to a sausage-making legislative process driven by political concerns, but rather according to a logical process that depends on a sober analysis of budget numbers (double ha!), and 2) reading lawmakers’ minds to determine how they make these determinations.
Here’s the tl;dr version: you are not paying an extra cent because of my ability to take a higher SALT deduction than you. At most, we’re both adding to the debt. You’re adding to it, and I’m adding even more to it.
If anyone is “subsidizing” my deductions, it’s future generations, who will have a slightly larger debt.
Guess what? There are plenty of other tax breaks that also add to the debt, and help out people whose family budget is nowhere near as tight as those of urban professionals like myself. There’s the carried interest loophole. Low capital gains taxes. Eliminating the estate tax, as this bill would do.
More fundamentally, the way to deal with the debt is not through eliminating tax breaks. That is peanuts. Entitlement reform is the way to deal with the debt. But somehow, if you benefit from that, I bet you’re all of a sudden not interested in this thing we call “reform.”
It’s also worth emphasizing: SALT deductions are hardly the only “subsidies” (that are not really subsidies) in play here. California, I repeat, is a donor state. We give more to the federal government than we take in — and that is true of other states with big urban areas, like New York and Illinois. And there are plenty of subsidies we fund for the rest of the country. We fund flood insurance subsidies for citizens of Texas, Louisiana, Florida, and other flood-prone areas, making it easier for people to build in these areas without paying the full cost of living there, as they would with unaffordable unsubsidized flood insurance. We pay for pork in West Virginia and Kentucky and Wisconsin and countless other places.
That’s real money spent. Subtract all that from the amount you think you are subsidizing us with the SALT deductions.
Some of you aren’t making the “waaaah we’re subsidizing you!” argument. You just believe that there should be a tax system with fewer distortions and loopholes. As I said yesterday: I am with you — as long as my taxes don’t get raised. This government is not responsible enough with its money to demand that I pay more, in the interest of simplification or any other abstract concept. If you want to smooth out and simplify, find a way that doesn’t cost my family thousands of dollars a year.
If your argument is “woe is me, you need to pay more in taxes so that you pay your fair share, Patterico!” then you’re no better than a Bernie Bro. You’re not actually paying more because of me. You just don’t like seeing me get a break. You’re envious.
Don’t be. Trust me: I’m already getting soaked by my state government. And it’s easy for you to say: “well then you should talk to your state legislators or vote them out.” You don’t think I have tried? It doesn’t work. It’s like me blaming you for ObamaCare not being repealed. Don’t whine about ObamaCare to me. If you don’t like it, you really should talk to your federal legislator about it!
There is no reason to put an additional burden on the backs of the already overtaxed middle class in large states. If you’re envious of me that I can deduct more in state and local taxes than you can, well, I notice you’re not quite envious enough to come live here, because that means actually paying tens of thousands in income taxes, property taxes, state sales taxes, and local sales taxes, and so forth. But you can! The “vote with your feet” argument works both ways. If you don’t like the fact that I can deduct SALT in a high-tax state, vote with your feet and come here.
Because I can tell you: I don’t think this thing is going to pass in its present form. Meaning the SALT deductions will remain. If I’m right, you need to either get over your Bernie Bro envy, or come join the party in California, where we pay through the nose in every tax imaginable, but at least we get to deduct a little bit from our federal taxes.
Join us! We have palm trees!
If you don’t want to, then stop whining about a break we get that doesn’t really hurt you, except in a laughably theoretical and unrealistic way. You can get that break too, by the simple expedient of uprooting your entire life and moving here. If you don’t want to do that, that’s not my fault. It’s your choice.
Join the conversation as a VIP Member