This forum has exposed a number of problems with the concept of solving the federal government’s budget problems by “taxing the rich.”
In the latest National Review, Kevin A. Hassett notes that the Obama administration’s interest in boosting taxes on the wealthy seems to have some interesting caveats:
Higher taxes on [rich people] are always seen as desirable — unless, of course, they might fall on Democratic rich people.
Out tax code is filled with special tax treats for the Democrats’ wealthy constituents. The two biggest-ticket items are the federal deduction for state and local taxes and the mortgage-interest deduction. The former disproportionately benefits higher-income individuals who live in states with bloated governments and higher taxes — California, here I come. The latter disproportionately benefits those who live in well-established metropolitan real-estate markets.
Hassett crunches some numbers on the mortgage-interest deduction and finds some interesting results:
The 13 states with the greatest per capita benefit were all won by Barack Obama in the 2008 presidential election. By contrast, the six lowest-benefit states were all won by John McCain. Across the country (including the District of Columbia), the average benefit was $310 in blue states and $178 in red states. I suspect that the state- and local-income-tax discrepancy would be even larger.
