Capping the deduction for state and local taxes (SALT) will accelerate the pace of migration of high earners from the Northeast and California to states like: Arizona, Nevada, Tennessee, Texas and Utah, they wrote.
“High earners in places with hefty income taxes, not just California and New York, but also Minnesota and New Jersey will bear more of the true cost of their state government.”
So they are leaving and will continue to leave, making it “very bad” for high tax blue states, they found in their 11th Annual report titled “Rich States, Poor States.”
“Red states ought to brace themselves: The Yankees are coming, and they are bringing their money with them. Meanwhile, the exodus could puncture large and unexpected holes in blue-state budgets.”
The high-tax blue states need to get with the program, the pair write.
“As far as we can see, the only way for blue states to prevent this coming fiscal bloodbath is to start taking tax competitiveness seriously, and to cut their tax rates in response. Progressives should do the math: A 13% tax rate generates zero revenue from someone who leaves the state for friendlier climes,” they wrote.
“Blue states ought to be able to lower their taxes and spending dramatically without jeopardizing vital services.”
And that would make the tax cuts law beneficial to everyone in every state.