A few days after winning the presidency, Donald Trump visited Manhattan’s posh 21 Club and told the swells dining there, “We’ll get your taxes down. Don’t worry about it.”
So far he seems intent on following through. Congressional Republicans are working on a tax-reform plan that in practice would benefit the well-to-do. And Trump’s pick of spending hawk Mick Mulvaney to head the Office of Budget and Management suggests that government programs may indeed be slashed to make such tax cuts palatable to fiscal conservatives.
Democratic lawmakers representing liberal parts of America habitually denounce this sort of thing: Spending reductions combined with tax cuts benefiting upper incomes. The question is, “should they?” and the answer is “no.” The blue states should take the money and run.
The time has come for liberals to recognize that the Republican agenda — which they have little control over anyway — can work to their advantage. Who gets the least return on the money they send to Washington? The economically successful blue states. Which states most depend on federal spending? The poorer red ones.
Most of the proposed federal tax reforms would leave more wealth in the affluent blue states. They could capture some of it through their own taxes and economic activity unleashed by residents with more money in their pockets.
Repealing Obamacare alone would deliver tax cuts totaling $346 billion over 10 years, every penny going to households making $200,000 or more. Interesting that the 12 states with the largest percentage of such households all voted for Hillary Clinton.
No more universal health coverage? Not necessarily. Massachusetts has Romneycare, a wildly popular state-run system that served as a model for the Affordable Care Act. Insurers there expect little upheaval from an Obamacare repeal. Massachusetts, by the way, has the strongest economy in the country, according to Governing magazine.
California’s state-run insurance exchange is in good shape, notes Nicholas Bagley, a professor at the University of Michigan Law School. California could simply adopt its own individual mandate as Obamacare does. Requiring everyone to buy coverage (or pay a fine) brings healthy people into the insurance pools. Having the young and hearty subsidize the sick and elderly keeps the pools stable. Connecticut, New York, Oregon and Washington are in especially good positions to do likewise, Bagley says.
Trump’s choice of Scott Pruitt, a climate-change denialist, to head the Environmental Protection Agency alarms environmentalists. So does Peter Navarro as head of a new White House trade council. Navarro has accused NASA of “politically correct environmental monitoring” of climate change through its earth-observing satellites.
No matter. “If Trump turns off the satellites, ” Gov. Jerry Brown said, “California will launch its own damn satellite.” Given California’s lead in confronting climate change, we can well believe that Brown, who heads the world’s fifth biggest economy, would follow through on that promise. You can bet that the work to build the satellites would almost all land in California.
In 2004, California set fuel-economy standards higher than the federal government’s. Twelve other states followed California’s lead and after an unsuccessful suit to stop the stricter standards, the auto industry came around.
In 2010, California required that 33% of its electricity come from renewable energy sources by 2020. It was recently raised to 50% by 2030. Now 30 states have renewable energy requirements.
“Cap-and-trade” is a market-based approach to cutting emissions of planet-warming greenhouse gases. When Congress failed to pass cap-and-trade legislation, California set up its own system. As of this writing, 10 states have done likewise.
This isn’t just environmental do-gooding. It is economic development. Almost 60% of all clean-energy venture capital in the United States ends up in California.
The federal income tax has been called a blue-state tax because the higher incomes tend to cluster in Democratic strongholds. What’s especially unfair about this is the federal tax code does not account for cost of living, which is highest in the elite coastal cities.
Someone making $90,000 in Houston would have to pull in $162,000 to live as well in San Francisco, according to BankRate’s calculator. Yet, all else being equal, the San Franciscan pays far more taxes to the federal government than the Houstonian.
There’s no reason why like-minded states can’t get together and solve problems, including local challenges and international ones like climate change. For the richer blue states, a reduced federal tax burden would leave them with the added means to address these challenges. And the nicest part: They can spend the money at home.