Andrew Cuomo Goes to War
It’s a battle between the blue and the red, says New York’s governor.
In the iconography of the American Civil War, the two sides are defined by their colors: union blue versus rebel gray. A century and a half later, Andrew Cuomo invokes colors to advance again the argument that a Republican federal government has divided the states. This time the colors are red and blue.
In his official address kicking off the new year—and no doubt his bid for the White House—Mr. Cuomo accuses Republicans in Washington of having declared an “economic civil war” aimed at “robbing the blue states to pay for the red states.” The reference is to the limit on deductibility for state and local taxes in the GOP tax reform passed just before Christmas. The effective tax hike on New York residents, the governor complains, “could cause people to leave the state.”
Hyperbole aside, Mr. Cuomo and other blue-state governors are right about the pain. The SALT deduction (State And Local Tax) operated as an effective federal subsidy for blue-state taxpayers because it returned to them some of the high taxes they paid to their state governments. With the deduction now capped at $10,000, citizens in states such as New York, New Jersey, California and Connecticut will be feeling more keenly the pinch of their states’ tax and spending policies.
“SALT is one of many maneuvers that have let states spend without facing reality,” says Eileen Norcross, director for the State and Local Policy Project at George Mason University’s Mercatus Center. “The states hurt the most by the changes to SALT are the same states that have relied on evasive budgetary tactics: lowballing liabilities, skipping pension payments and issuing debts to cover debts.”
Mr. Cuomo’s resort to war metaphors is illuminating. In the few weeks since the tax bill has become law, blue-state pols have declared they are willing to entertain any number of workarounds to deliver relief for their taxpayers: suing on the grounds that capping the deduction is unconstitutional, changing their nondeductible state income taxes into deductible charitable contributions, or replacing a state income tax with a payroll tax, which employers would be able to deduct.
In other words, Gen. Cuomo and his fellow civil warriors will consider anything to hold the blue line—anything, that is, except address the root problem by lowering their taxes and spending. Because to do so would require taking on the public unions that drive much of state spending and debt, and are the key constituency of the 21st-century Democratic Party.
Ironically, in the course of denouncing the attack from Republicans in Congress and the White House, Mr. Cuomo ceded their core argument: Tax rates affect behavior. For in his declaration of war, Mr. Cuomo admitted his worry that hiking the marginal tax rate on New Yorkers gives them an incentive to relocate. Until now it was supposed to be a Republican canard that highly taxed blue staters defect to lower-taxed red states.
Just as illuminating, this is a battle being waged for the wealthy. In his speech Mr. Cuomo hailed the Empire State as a progressive “beacon” unto the nation. But in a Monday post, Thurston Powers, a legislative analyst for the American Legislative Exchange Council’s Center for State Fiscal Reform, noted that 88% of the savings from the SALT deduction were enjoyed by people with incomes of $100,000 or more.
Note to New York City mayor and self-styled Progressive in Chief Bill de Blasio : The elimination of this deduction diminishes an effective subsidy for wealthier taxpayers. So where are the shouts of support for making the rich pay their “fair share”?
Instead, Gen. Cuomo speaks of war. It’s an interesting way to enter 2018. At the moment almost all press attention has been focused on the national level, where the story is the prospects for Democrats to use the November midterms to take both the Senate and the House from Republicans.
But Congress isn’t the only place where Democrats have lost influence. One critical measure of Democratic weakness has been the Republican capture of governorships and state legislatures. Over the Barack Obama years, Democrats lost roughly 900 legislative seats across the nation, reducing the party to its lowest level of representation in decades.
Even some recent big reversals—e.g., Virginia House seats and the New Jersey governorship—haven’t really altered the lopsided imbalance. At the national level, the Democratic message still seems to be “resistance.” Meanwhile, at the state level Steve Malanga, a fellow at the Manhattan Institute, suggests Democrats such as Gov. Cuomo haven’t figured out their real enemy.
“Voters know that the dilemma Democrats really face is that blue-state reform requires taking on the public-sector unions,” says Mr. Malanga. “It’s hard to imagine how a message of civil war is going to win back Democratic seats at the state level or make these states more attractive economically for their citizens.”