In recent years, “red state socialism” has become the hallmark of American federalism. That is, even as supposed GOP budget hawks loudly (and wrongly) decry “out of control” spending by Uncle Sam, less well-off Republican-controlled states generally benefit from a one-way flow of federal tax dollars made possible by wealthier blue states usually dominated by Democrats. But that is as it should be. After all, Americans everywhere should want Americans anywhere to have the resources for the education, health care, and anti-poverty programs they deserve and may badly need. Patriotism, civic duty, community, and compassion don’t end at the state line.
That’s especially true in times of war, crisis, and natural disaster. When Americans anywhere are in danger, there is no “red” or “blue,” but only Red, White and Blue. With the staggering calamity from Hurricane Harvey still unfolding in Texas and Louisiana, first responders and volunteers, charities and church groups, and millions of people from every state and every faith all reaffirmed that shared American ethos.
But back in Washington, the president and some of his GOP allies on Capitol Hill provided a stark contrast to that spirit of selflessness and unity. Gulf state members of Congress, led by Texas Republicans Sens. John Cornyn and Ted Cruz, called for billions of dollars in federal aid they voted to deny their blue state brethren after Superstorm Sandy in 2013. At the same time, Donald Trump launched his push for a massive tax cut windfall for the wealthy, a giveaway he and GOP leaders hope to pay for in part by punishing taxpayers and breaking budgets in traditionally Democratic states. Meanwhile, in areas as diverse as health care, immigration, and possibly infrastructure, GOP policymakers are seeking blue state payback as a means of retribution—or just out of pure spite.
As you may recall, on the eve of the 2012 election Sandy wrought devastation along virtually the entire eastern seaboard. As in the wake of Hurricane Katrina that crippled New Orleans and the Gulf Coast 12 years ago, Congress prepared a $51 billion recovery package for the impacted states. But in 2013, 58 House members who voted for Katrina funding for Texas, Louisiana, Mississippi, and Alabama in 2005 said no to help for states from Florida to Maine. As a spokesperson for Rep. Steven Palazzo, whose Mississippi 4th District was heavily damaged by Katrina explained, “Congressman Palazzo fully supports a Sandy relief package that includes spending offsets.” The office of Missouri Republican Sam Graves concurred:
“The days of buy now and pay later are over.”
What changed between 2005 and 2013? Control of the White House, for one. When George W. Bush sat in the Oval Office, Republicans like Sam Graves had no problem voting to “buy now and pay later.” Graves, like Utah Sen. Orrin Hatch, voted for President Bush’s unfunded $400 billion Medicare Part D prescription drug program. (In 2009, Hatch explained the GOP’s refusal to demand either spending offsets or new tax revenue to fund the program by declaring, “It was standard practice not to pay for things.”
But if the president of the United States was a Democrat during the Superstorm Sandy catastrophe, so too were most of the residents of the states in which it wrought havoc. As retired Long Island Democratic Rep. Steve Israel remembered this week, “There is deep and lingering resentment by members of Congress who needed help in their districts when Sandy just ravaged their constituents.” And at the front of what this week is now being called the “Comeuppance Congress” is Ted Cruz. As Cruz put it at the time:
“Hurricane Sandy inflicted devastating damage on the East Coast, and Congress appropriately responded with hurricane relief. Unfortunately, cynical politicians in Washington could not resist loading up this relief bill with billions in new spending utterly unrelated to Sandy,” Cruz said in a January 2013 statement. “Emergency relief for the families who are suffering from this natural disaster should not be used as a Christmas tree for billions in unrelated spending, including projects such as Smithsonian repairs, upgrades to National Oceanic and Atmospheric Administration airplanes, and more funding for Head Start.”
But then as now, Cruz was lying.
GOP opposition to Superstorm Sandy relief in 2013 had nothing to do with “pork” or “offsets.”
On Monday, Cruz defended both his “no” vote and the mythology behind it. “The problem with that particular bill is it became a $50 billion bill that was filled with unrelated pork,” Cruz said of his refusal, “Two-thirds of that bill had nothing to do with Sandy.” As the Washington Post explained this week in branding Cruz’s whopper a Three Pinocchio Lie, “The Congressional Research Service issued a comprehensive report on the provisions, and it’s clear that virtually all of it was related to the damage caused by Sandy.” (Nevertheless, President Obama moved quickly to call for federal funding when Houston was hit by flash floods in 2015 and expedited FEMA dollars for Texas Gov. Greg Abbott when Harris, Grimes, Parker, and Fayette counties were hit again the next year.) It’s no wonder New Jersey Gov. Chris Christie summed up Cruz’s treachery even as he rightly urged New Jersey’s Congressional delegation to come to the aid of the Lone Star State:
“I see Sen. Cruz, and it's disgusting to me that he stands in a recovery center with victims standing behind him as a backdrop and he's still repeating the same reprehensible lies about what happened with Sandy.”
But when it comes to disgusting stands and reprehensible lies, the disaster duplicity of the Sandy Republicans will be exceeded by Donald Trump’s new “tax reform” offensive. With its three tax brackets, lower marginal income tax rates, abolition of both the Alternative Minimum Tax and the estate tax, as well as a 15 (down from 35) percent corporate tax rate even for businesses like his own, the “plan” would redirect billions of dollars from the United States Treasury to Donald Trump and his family. Nevertheless, Trump, who on the campaign trail promised his tax program “is going to cost me a fortune,” comically told his Missouri audience on Wednesday:
“I’m speaking against myself when I do this, I have to tell you.”
But what neither Trump nor GOP leaders like Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan want to tell you is what this still-to-be defined package will cost or how they are going to pay for it. Over the past year, analysts have forecast that proposals from Trump and Ryan will drain between $3 and $12 trillion over the next decade. As for how this hemorrhage of red ink from the Treasury will be prevented, Republicans like Treasury Secretary Stephen Mnuchin claim:
“This will pay for itself with growth and with the reduction of different deductions and closing loopholes.”
It’s not just that it won’t even be close. But thus far, the Trump administration and House Republicans have only identified one deduction they would end out of all the tax expenditures that now cost Uncle Sam more than $1.5 trillion a year. The tax break in question? The deduction for state and local taxes (SALT).
So far, Trump and his GOP allies have only targeted one of these loopholes for closure.
Why are Republicans now—and as they have since Ronald Reagan called it “the most sacred of cows”—seeking to kill the state and local tax deduction? Well, doing so will save an estimated $1.3 trillion over 10 years. And then there’s this:
What is clear is that residents in states that impose the highest combination of property taxes and individual and corporate income taxes would pay the most. Taxpayers in 10 states — California, Illinois, Maryland, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Texas and Virginia — claim more than half of the total amount deducted, according to the Tax Policy Center. (Even in states without income taxes, including Nevada and Washington, some residents benefit because they can deduct sales taxes instead, the center said.) [Emphasis mine.]
Yes, these are all Democratic states. (All but Pennsylvania voted for Hillary Clinton for president, and the Keystone State has a Democratic governor.) But the GOP’s blue state payback doesn’t merely seek to punish likely (and wealthier) Democratic voters. It is, as the New York Times suggested, “a tax on blue state liberalism.”
What do these 10 states have in common?
To be sure, the SALT deduction helps wealthier taxpayers. (That said, 55 percent of taxpayers earning more than $75,000 a year take the deduction.) Overall, only about 30 percent of taxpayers itemize. By and large, this group is more affluent than Americans as a whole. But they disproportionately live in high-tax, high-service states. Ending the deduction for state and local taxes doesn’t just mean their tax bills will go up, but that the Democratic states they live in will be pressured to cut their own taxes and public services. Public services, that is, like education, health care, transportation, and infrastructure, just to name a few.
Now, the deduction for state and local taxes has been part of the federal tax code since the 16th Amendment was passed and the federal income tax implemented in 1913. It was part of the Civil War income tax as well. None other than Alexander Hamilton in the Federalist Papers warned that “all the resources of taxation might by degrees become the subjects of federal monopoly, to the entire exclusion and destruction of state governments.”
In a nutshell, that’s what conservatives now seek for Democratic state governments. By terminating this tax break, Republicans in Washington, D.C. can export their austerity to the states. They make no secret of it. As former Michigan Congressman Dave Camp described his objective in 2014, “This deduction redistributes wealth to big-government, high-tax states from small-government, low-tax states.” In June, Speaker Ryan gave the game away on CNBC when he was asked how he would sell the idea to his GOP colleagues in states like New York, New Jersey, Massachusetts, and California:
“I would say two things. First of all, look at tax reform in its totality. Seocnd of all, let’s get the tax rates as low as possible for everybody. Not based upon where you live. And third of all, let’s stop masking profligate governments, let’s stop disguising the inefficiencies of some of these state governments you just mentioned and make taxpayers and all of those other states … pay for these states don’t have their act together.”
Ryan, of course, is wrong all on all counts. As we’ve already seen, most of the high-tax, high-service blue states are already net losers when it comes to federal spending received versus federal tax dollars they pay. And while blue state taxpayers are subsidizing red states, Democratic states are running balanced budgets even as they account for the lion’s share of the nation’s economic activity. (And as Howard Gleickman explained, the 10 states whose residents claim the largest average amount of state and local taxes on their federal returns are also represented by 39 GOP House members. If a little more than half balk, nixing SALT is dead.) It’s no wonder Russell Goldsmith, chairman and CEO of City National Bank, called the Republican war on SALT “the GOP’s tax attack on blue states.”
Killing SALT will leave a bitter taste for GOP members of Congress, too.
But it’s hardly the only GOP attack on blue states currently envisioned by the Republican Party. Even after the failure of President Trump and the Congressional Republicans to “repeal and replace” the Affordable Care Act, the party’s elders have not given up the ghost. As Breitbart reported with great excitement, former Pennsylvania Sen. Rick Santorum and South Carolina’s Lindsey Graham are still laboring to undo Obamacare and turn over all of its funding over to the states in the form of block grants:
Santorum has been working with Sens. Lindsey Graham (R-SC) and Bill Cassidy (R-LA) among others, as well as with House Freedom Caucus chairman Rep. Mark Meadows (R-NC). He has also been working with a large group of Republican governors, including Wisconsin’s Scott Walker, Arizona’s Doug Ducey, Arkansas’s Asa Hutchinson, and Mississippi’s Phil Bryant. Two of those states—Arkansas and Arizona—are Medicaid expansion states; the other two are not.
As is usually the case, these Republicans have their talking points down: It all boils down to robbing Blue to pay Red. Santorum summed it up this way:
“[T]he way that Obamacare is structured, it benefits a handful of states. There are four states in order of how well they do: Massachusetts, California, New York, and then Maryland. Those four states which comprise about 21 percent of the population of the country get close to 40 percent of the money under Obamacare.”
Now, this is incredibly misleading. Many GOP-controlled states refused to set up their own Obamacare exchanges and, more importantly, refused to expand their Medicaid programs. (It is also worth noting that while Uncle Sam pays on average 57 percent of “unexpanded” Medicaid in the states, Republican strongholds in the South like Mississippi get 75 percent of their funding from the federal government.) Between them, Texas and Florida could have extended health insurance to well over 3 million people had they simply said “yes.”
Most of these states said no to Medicaid expansion and its dollars—out of spite.
Nevertheless, Graham explained:
So, what we did this will repeal the individual and employer mandate, and medical device tax. We left the other taxes in place and created a block grant. Under Obamacare, 4 states got 40% of the money. That’s New York, California, Maryland, and Massachusetts. They’re 20 percent of the population and so by 2026 our goal is to have parity. It will be roughly the same no matter whether you live in South Carolina or California. We help states that did not expand their Medicaid under Obamacare catch up. High-cost expansion states will have a glide path down to a number that will be parity by 2026.
The irony, of course, is that Obamacare funding would have disproportionately benefitted GOP states if their attorneys general didn’t successfully sue the administration over Medicaid expansion. When the Supreme Court ruled in their favor in June 2012, Medicaid expansion went from being mandatory to being optional. With their much higher rates of uninsured, the red states would have pocketed more than their share of the Affordable Care Act’s Medicaid spending.
Under President Donald Trump, Republican willingness to bring the pain to Democratic states is taking new forms. While GOP states balked at being coerced into accepting federal Medicaid expansion dollars, the Trump administration has promised to withhold funding from states that refuse to participate in its immigration crackdown. As early as August 2016, candidate Trump was warning “sanctuary cities” that “refuse to cooperate with federal authorities will not receive taxpayer dollars, and we will work with Congress to pass legislation to protect those jurisdictions that do assist federal authorities.” As KQED reported on February 6:
President Trump says California is “out of control in many ways” and that he’d consider “defunding” the state in response to efforts to provide sanctuary to undocumented immigrants.
By March, blue state attorneys general were on the front lines, opposing the Trump administration’s Muslim ban, its demands for turning over undocumented prisoners to federal authorities, and other tactics in its new immigration policy. Nevertheless, Trump AG Jeff Sessions went to Philadelphia to declare that, despite the city’s record-low crime rate, residents “have been victimized” and denounced “giving sanctuary to criminals.” In July, Sessions warned sanctuary cities nationwide that they risked losing access to $260 million in federal grants, a program Trump hopes to boost to $384 million next year. The response from cities like New York and San Francisco has been to declare themselves in compliance with federal law and explain how the draconian measures will make their communities more dangerous; Chicago and Philadelphia are taking the Justice Department to court. (Meanwhile in Texas this week, a federal judge blocked for now the Lone Star State’s even harsher SB4 law after the cities of Houston, Austin, San Antonio and El Cenizo, as well as Maverick and El Paso counties and the Mexican American Legal Defense and Educational Fund, argued the bill violates several provisions of the Constitution.)
Judging by his first seven months in the Oval Office, Donald Trump seems determined to serve as the president of the Red States of America. His travels have been almost exclusively to states that he won. Should it ever become law, it’s not difficult to imagine Trump steering the bulk of his much-hyped, little-advanced $1 trillion infrastructure bill to roads, bridges, airports, rail lines, and other projects in Republican-controlled states. If so, it would be only the most cynical example of the GOP governing philosophy in the Age of Trump to reward the red and beat on the blue.
