President Barack Obama is resisting House Speaker John Boehner’s proposal to raise $800 billion in new revenue by closing tax loopholes because a large percentage of Americans take advantage of those loopholes in Democratic states, The Wall Street Journal says in an editorial.
Boehner's ideas, inspired by Mitt Romney, would impose a limit on annual deductions. But since the rich tend to itemize their deductions more than average taxpayers pay higher marginal tax rates, they benefit more from deductions, according to the newspaper.
“Suddenly liberals are having second thoughts, and our guess is that this is because residents of high-tax Democratic-run states are about twice as likely to take advantage of tax loopholes as taxpayers in low-tax states,’’ the Journal says.
“For example, 44 percent of Connecticut filers itemize their deductions, but only some 21 percent of North and South Dakota residents do.’’
And in 2010, with the deduction for state and local income taxes for all states amounted to $249.7 billion, five liberal states—California, New York, New Jersey, Maryland, and Massachusetts—accounted for about $121.8 billion of that amount, according to the paper.
The Journal says that Democrats now “tend to represent states with ever-higher tax rates that prop up state and local governments dominated by public unions that demand ever-higher pay and benefits. The resulting state tax burden would be intolerable if much of it weren't passed off on Uncle Sam.
“Mr. Obama wants to raise tax rates, rather than eliminate deductions, so his fellow Democrats can keep raising state and local taxes without bearing the full economic and political cost. Tax equity and economic growth are the big losers.’’
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