SALT in the Wound
To: Rep. Thomas Emmer 315 Cannon House Office Building Washington, D.C. 20515
Rep. Jason Lewis 418 Cannon House Office Building Washington, D.C. 20515
Rep. Erik Paulsen 127 Cannon House Office Building Washington, D.C. 20515
Gentlemen: SALT stands for state and local taxes, but clearly you do not. At least, you have been voting to disallow your Minnesota constituents from being able to deduct state and local taxes from their federal income tax liability. The deductibility of state and local taxes is older than the current federal income tax. You three have voted for dropping that deduction for individuals.
On the other hand, Minnesota corporations have received your vote to continue to be able to deduct state and local taxes. But there is a group more deserving of your solicitude than Minnesota corporations—Minnesotans! There are valid reasons for the exemption for state and local taxes. When the top marginal rates for federal income tax surged to 77 percent during the height of World War I, and again in 1944 to 94 percent, in the absence of a deduction for state and local taxes some taxpayers would have faced income tax rates exceeding 100 percent. There are other sound reasons for the more than century-old practice of exempting state and local taxes from federal income tax.
Benjamin Franklin often said that in life, the only things that are certain are death and taxes. And it is true that you politicians seem to have an unearthly addiction to levying taxes. Some politicians—mostly Democrats—want to tax death (by estate taxes). Others, including you three, appear to wish to tax taxes.
There used to be a political party that believed in moving government functions as close to the electorate as possible. It used to be an article of faith that to the extent possible, government functions and associated taxation should be moved as close to the electorate as practicable. That political party was called the Republican Party. You may remember it. One of you (Jason Lewis) has even written a book that is a paean to state’s rights. Or, as the late Gov. Rudy Perpich used to say, “It’s a lot easier to drive to St. Paul to talk to your elected representatives than it is to drive to Washington, D.C.” States should be free to experiment with various programs and taxation levels. That is why we used to refer to states as the laboratories of democracy. You may remember those days.
Many states adopted a high-tax, high-service model, while other states went a different direction. Perhaps you should reflect on how that has worked out. According to a study conducted by the personal finance resource website Wallethub, the five states least dependent on the federal government are New Jersey, Delaware, Illinois, Minnesota and California. Minnesotans, the study found, received a fraction of every dollar paid in federal income tax back in return.
The five states most dependent on the federal government, according to the same survey, are New Mexico, Mississippi, Kentucky, Alabama and West Virginia. Or put another way, red states—basically those states that have politicians that bray loudest for lesser influence by the federal government—are much more dependent on the federal government than blue states are. Why is this the case?
Most readers of this column have children who have attended college or are now applying to college. They, of course, could encourage their children to go to any one of a number of educational institutions in the state of Minnesota; we have one of the finest university, state college and private college systems in America. As state taxpayers, we have paid dearly for these assets. Other states that involved parents may have looked at would include California, New York, Illinois, Massachusetts and Connecticut, all states with long histories of residents paying high taxes, in part for educational excellence.
On the other hand, few college-admission-obsessed parents spend a lot of time looking at Alabama, Mississippi, Louisiana, South Carolina or for that matter, Texas or Florida, all states where the local electorate has chosen not to tax itself for educational excellence. The three of you should be educated enough to see the connection.
Several Republican members of Congress have been quoted in the media as suggesting that if residents of high-tax states object to elimination of the SALT deduction, they can simply move. Perhaps you three share that sentiment. But here’s a better thought: Why don’t the three of you simply introduce legislation, either as an amendment to the conference committee report or as separate legislation, that rebates to each state the differential from what that state pays into the federal fisc, minus what it receives back? In other words, rather than moving, we just want our money back.
Congressmen are elected every two years in districts corrected by the census every 10 years, so they are close to the people and represent their constituents’ interests. If you truly believe in moving effective government to the level closest to the people and support states as laboratories of democracy, you should reflect the interest of your Minnesota constituents.
You have a number of votes with which to correct this misguided attack on them. It may be that you have been solicitous of the interest of Minnesota companies. But this coming November, you will rediscover that corporations cannot vote for your reelection, but we can. If this is not corrected, residents of this state should not move to low-tax states (Mississippi?); you should move. We may be able to accomplish that next November.
Vance K. Opperman For the deductibility of state and local taxes
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Vance K. Opperman (email@example.com) is owner and CEO of MSP Communications, which publishes Twin Cities Business.