Tax Reform, may not seem related to Healthcare Reform, but it is. Particularly, the deduction of State taxes on Federal returns. Let’s see why.

This Post may seem odd to those in states that have no or very low state income taxes. But the prospect that Congress might pass and President Trump sign a bill causing the elimination of the deductibility of state taxes on Federal returns is a possibility.

Let’s frame the discussion a bit.
For example, California and New York have state income taxes on their residents that are among the highest tax rates in America. Why do these states tax their residents so highly? It’s widely reported that it’s because these states are also the most liberal in entitlement payments to residents. You’ve all read how much is given away to residents in these states with little or no accountability and seemingly little fear for how to pay for the entitlements in the future.

Heck, in CA is seems the Dems seldom say “No” to any give away to residents (legal or not) not to mention the many restrictions on business. These attitudes result in a tax policy that is very burdensome to employers, employees and the folks who pay the majority of the taxes in Ca. and many other states.

To help offset these high state taxes the folks in Ca. and NY (and other states) are allowed to deduct the state taxes they pay from their Federal tax return which eases the pain (tax due) caused by Federal income tax, a bit. It also means that the tax payers in these states get higher deductions than tax payers in other states.

Your humble author lives, works and pays taxes in Ca so eliminating the deduction for state taxes would affect me directly. But is this one of those times when one must look further ahead than just the next tax year and make decisions based on what’s best for the Nation. I don’t mean to sound too honorable because it is my hope that if these deductions are eliminated that then more Ca citizens will stand up against the continual onslaught by Ca’s Legislature against financial fairness and accountability.

So, if more people of means or at least higher income taxes in Ca and NY  stand up and fight against foolish spending, frivolous projects and staggering regulations that kill opportunity for everyone then maybe everyone will have a chance to improve their lives with more jobs with higher wages, better access to healthcare and a chance to change the lives of their children and children’s children.

You know that I am an optimist trapped in a skeptic’s body, but are my ideas naïve? Well, what we have is failing so what do we have to lose if we give it a try.

When I moved to Ca in 1985 it was a different place with opportunity that fueled the ambitions of those willing to try. It also was a state in which one could take an idea, build on it and with luck and toil make it work. Sure, Hollywood and Silicon Valley have created a bunch of Ka-zillionaires but what about the folks that just wanted to start a small business to create jobs for others so they could prosper and live better?

The economy grows because of the small businesses that employ just a few employees, that provide sound benefits and good wages. It can be that way again if we make some well conceived gradual improvements.

So, how is Tax Reform related to Healthcare Reform? If people in Ca and NY (and other states) can’t deduct their “high state taxes” and therefore become frustrated by higher federal taxes, then maybe they’ll start looking for ways to reduce other costs. One area would to make more reasonable decisions about  reforming healthcare financing.  Healthcare premiums and OOP is costing many people more than their taxes.

Anyway, I think it’s possible. Let me know what you think because we’re all in this together.

Until next week.

Mark Reynolds

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