A plea to the President II

Mr. President, while we’ve got you: One proposal in your draft tax reform plan would wallop New York — eliminating taxpayers’ ability to deduct state and local taxes from their federal bills. The deduction, enshrined in federal law since before a federal income tax ever existed, is based on a simple premise: that, in our federalist republic, if an individual is committing money for state or local government services, the feds ought not subject that money to a second layer of taxation.

As Alexander Hamilton explained in the Federalist Papers, without any such controls, “all the resources of taxation might by degrees become the subjects of federal monopoly, to the entire exclusion and destruction of state governments.”

Laugh at the notion if you will in an era when New York City’s budget is just south of $85 billion — but the top marginal income tax rate in the federal tax code in the 1950s was above 90%.

As the nonpartisan Tax Foundation puts it, “During this era, the state and local tax deduction prevented combined federal, state and local income tax rates from exceeding 100%.”

Eliminating the deduction would amount to a direct assault on New York, as well as on Texas, California and Pennsylvania.

More than 3 million New York filers save a total of $17.5 billion a year — about $5,000 on average. That’s money they’d kiss goodbye the second Congress and the President pulled the rug out.

New York already sends some $40 billion more to Washington in taxes than it sees back in services, a number that would swell to comically lopsided proportions if the deduction ends.

Critics target the deduction for having a regressive effect. But that is accidental; rich taxpayers in states like New York only pay high state and local taxes to finance generous public education, expensive but necessary police forces — and robust social services for millions of poor people.

In other words, to foot the bill for common civic goods, via government closer to the people.

That is something Republicans in Washington who claim to want to devolve authority — you included, Mr. President — should applaud.