I can't overstate how sad it would be if the goal of this change was plainly to stick to to Democrat states. It there is truly do much disdain that didn't boat well for the future as a united country.
The entire tax bill seems to be sticking it to Democrat states, in particular New York and California, but it is really about urban vs. rural politics.
Democrats have become too concentrated as a party in urban areas and so rural voters have gotten enough political power to attempt to address what they view as economic inequities in the current urban/rural income distribution.
Republican have also flipped the script on Democrats and so now they are proposing to tax the "rich" (actually urban middle class) and redistribute that to the poorer rural middle class.
It is funny because conservatives have been warning for decades that redistributionist games don't end well, while the Democrats have been advocating them, but now that the shoe is on the other foot it doesn't seem like such a good idea.
This narrative isn't consistent with what the actual tax bill does, which is a massive redistribution of wealth to the very richest Americans. For example, what part of repealing the estate tax for inheritances above $5.5 million will help this urban middle class?
I don't see how the tax plan helps the rural red state poor. It certainly helps the rich and prefers red states (people lose state and local deduction, businesses keep it). However, the rural red state poor already aren't paying much if any taxes. It's more of a red meat issue for them.
I honestly haven't calculated the tax difference for the rural red state poor. Are you sure they won't benefit from the increased standard deduction? If you're sure then I'll trust your calculations over my not-calculations.
1. As already mentioned, it helps ultra-wealthy and people in red states at the expense of the blue states. But by crippling the tech economy, the govt. would harm their own long-term ability to collect tax revenue to invest in other states. Right now, CA provides more tax revenue than it takes back and this money pays for federal govt. projects elsewhere.
2. Many people would get bankrupted simply by vesting. It's one thing to tax people once they have money. But most options are not liquid. Many people would simply not have money to pay for options that they cannot sell and will not be able to wait for some hypothetical IPO or buyout.
Let's just be honest about what this is: it's a vindictive and cynical move to harm the economies in blue states and only marginally help those in red states, and then only in short term (until the tech economy in the US contracts and moves elsewhere).
If this passes, I hope those who support it enjoy their feeling of revenge, because that's all they'll end up with. The rest of us in tech sector will just find another place to grow our business.
Pro-redistribution people like me would be thrilled if we were removing distortionary tax expenditures from rich people to benefit the poor or even middle class.
What’s proposed is punishing the urban rich to benefit the megarich, with a tax increase after less than 10 years for the median household.
Which is very clever if your poor base is willing to go along with it, which appears is the case.
Who cares if all semblance of shared institutions dies in the process, the megarich get their tax cut!
> the goal of this change was plainly to stick to to Democrat states
That's not the goal but a predictable side effect of a single party emerging with dominance from close to a decade of structural gridlock. Republicans want to give their base, both donor and electoral, a tax cut. The national debt scares many of their constituents. As a result, they have to at least look like they're trying to avoid blowing the deficit. So they send the bill to outside their base.
This wasn't "let's screw our political opponents." It was "let's help our base and stick the bill to our opponents." Subtle, but different.
It also bears mentioning that some of the proposals in the current plan are surprisingly well-considered. Also, it's not like all of it even hews to traditional republican orthodoxy. A few things I've read:
- Removing state exemptions. This concentrates more control at the federal level and is anti-states' rights which is arguably anti-Republican.
- Mortgage interest deduction removal/lowering the cap. Economists left and right agree this deduction is a huge sop to the rich, who own homes (the poor rent).
- Reducing corporate tax rates. The Economist makes the point constantly that the US's corporate taxes are some of the highest in the OECD and that shareholders, rather than corporations, should be taxed. These high rates also encourage crazy behavior like inversion transactions and tax games with repatriation, etc.
