One of the most unfortunate features of Trump’s Big Beautiful Bill is that it expands the deduction for state and local taxes, thus weakening one of the best provisions of the 2017 tax package.
This is bad news since it is foolish to have a loophole that makes it easier for states to impose higher taxes to fund more wasteful government.
For evidence, let’s consider a comparison of Florida and New York. And we’ll start with this chart, which shows that New York spends far more, on a per-capita basis, than Florida.
The chart comes from a new report by David Ditch of the Economic Policy Innovation Center.
He explains why it is very foolish for taxpayers elsewhere in the country to subsidize New York profligacy.
The House-passed OBBB increases the SALT deduction from $10,000 to $40,000 per taxpayer at a cost of $377 billion over 10 years, leaving less room for pro-growth tax reforms. …A review of the governance of New York State shows the punishingly high state and local taxes paid by Empire State residents benefit wasteful and corrupt bureaucracies. Increasing the SALT deduction would further subsidize New York’s dysfunction. Spreading the costs across the country would encourage more graft… Contrasting New York’s budget with that of Florida is instructive. …In 2000, New York State spending per capita was already 30% higher than Florida. By 2024, New York spent 133% more per capita than Florida. …It is understandable that representatives of high-tax districts in New York want to assist their constituents. However, threatening to force massive tax hikes on all Americans for the sake of a bloated SALT deduction is the wrong solution.
The report also explains that New York is abusing the Medicaid program, which is yet another reason why that program desperately needs reform.
But here’s the part of David’s report that is even more astounding, albeit in a depressing way.
New York’s per-student spending is the highest in the nation, including an average of $35,000 per student this year. …Public school spending is driven by the demands of politically powerful teachers’ unions. …Yet, higher education spending has produced worse outcomes. In 2022, New York’s 4th graders ranked 36th in the nation in reading and 46th in the nation in math. Meanwhile, Florida spends about $13,000 per student and its 4th graders rank 3rd in the nation in reading and 4th in the nation in math.
More money leading to worse results is not a surprise. But this is the steroid-fueled version.
I’ll close by sharing a chart from the Committee to Unleash Prosperity.
Is anyone surprised to see that people are moving from New York to Florida and not the other way?
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