Trump's Tax Proposal and Our Cities

Donald Trump’s first one hundred days have, from a comparative perspective, been marked by a failure to pass significant amounts of meaningful legislation. They have not, however, been uneventful. Keeping up with Trump’s bumbling, offensive statements, troubling ties to Russia and relationships between Trump aides and white supremacists has proven as difficult these past one hundred days as it was during the campaign.

Given all that it seems almost rational to not pay a lot of attention to Trump’s legislation because so much else is going on, and because the legislation will probably fail anyway. Nonetheless, the legislative proposals from the Trump administration are worthy of scrutiny because they tell us quite a bit about his political goals and intentions. Last week, for example, Trump introduced a tax reform package that, predictably, amounts to a resumption of the GOP policy of shifting wealth upwards and of one sided class warfare aimed at the poor. Nobody should be surprised that Trump’s proposal will make him and his rich friends richer. This is what kleptocrats do.

There is one part of the tax reform proposal that may reveal a bit more about Trump’s political goals. If his proposal becomes law, American will no longer be able to write off their state and local taxes on their federal income tax. This sounds a bit wonky, but it will have two significant effects. First, people who pay high state and local taxes, and thus benefit from the current write off, obviously live in big cities and states with higher tax rates. These include places like San Francisco, Chicago and Trump’s hometown of New York. These are places where many people with high incomes are not Republicans. Thus, this bill target primary high income Democratic voters. Obviously, some Republicans will get caught in this too, but the people who feel this the most will be higher income urban dwellers who skew much more Democratic than people with similar incomes in non-urban settings.

That is politics, and Trump is hardly the first President to use the tax code to try to settle political scores, but few have been quite so explicit about this. The second impact of this change in the tax code will be to push at least some high earning professionals out of cities and states with higher tax rates and make big cities less appealing for companies that employ a lot of people at good salaries. This, in turn, will create fiscal problems for those cities and states. It is difficult imagine Trump thinking this through to this degree, but it is not difficult others in his administration doing this. A central goal of the Trump administration has been to weaken potential sources of power outside of his presidency. Congress abdicated there role as a check on executive power months ago. Just this past week, Trump stated his intentions to try to weaken the judiciary, beginning by breaking up, whatever he meant by that, the Ninth Circuit Court of Appeals. He is now turning his attention to weakening the political power and influence of Democratic controlled cities and states.

If people begin to leave cities because of this new tax law, the impact on those state and local budgets could be significant. If that happens, those cities and states will be harder to govern as there will be fewer resources. The political motivation behind this should be apparent. During these first one hundred days we have seen powerful governors like California’s Jerry Brown and numerous mayors, like Eric Garcetti of Los Angeles seek to craft policies to protect the people in their cities and states against the impact of Trump’s presidency. This has been most evident in the sanctuary city movement, but also several regulatory issues. There is, however, one mayor in particular whose city and political power will be hurt by this the most, New York City’s Bill de Blasio.

Mayor de Blasio is probably the most outspoken critic of Trump of any big city mayor and is mayor of Trump’s hometown. New York City taxpayers have already been stuck with many of the security and other expenses associates with the President’s wife and young son remaining here rather than moving to Washington. These are taxpayer dollars that could be used to fix roads, clean up parks or myriad other purposes, but instead are used for what amounts to an unfunded mandate. This new tax proposal, if it passes, will take even more money out of the tax coffers of New York and other big cities making it more difficult for progressive mayors to creator fund progressive programs.

The revival of urban America over the last quarter century or so is one of the important and impressive changes in America during that period. There are many reasons for this ranging from demographic to technological, but also pubic policies for which both major parties can take credit. Trump’s new tax proposal could begin to reverse this. That would be bad the entire American economy as our cities are engines of economic growth, magnets for tourists and hubs of innovations, but this President, whose major goal is to consolidate his power, and restrict all other sources of power, apparently doesn’t care about that.