Tax Reform Points to Potential to Be a Northeast Beacon


Writing for Bloomberg View, Jared Dillian describes a policy question that Rhode Islanders need to consider seriously:

Click to help us keep the doors open.

Of bigger concern is how the leadership of high-tax states will respond [to the loss of a federal tax deductions for some of their residents’ state and local taxes]. If individuals and businesses leave, eroding the tax base, states will face a choice between cutting spending or raising taxes. Less spending is hard with existing pension obligations, so there’s a strong possibility that a state like New York or Connecticut could enter a “death spiral” where residents leave, the state raises taxes, more leave, and so on. Since the governments of the high-tax states are nearly all Democratic, I doubt many have the desire to cut services when faced with net migration out of the state.

It goes further. People are starting to figure out that an inability to fully deduct property taxes results in lower real estate valuations. If there is more tax on your house, your house is worth less. This is just math. I suspect the market is rather efficient and real estate values will drop in high-tax jurisdictions, and the drop will accelerate as people leave and bids evaporate.

Dillian also describes the existence of some border experiments, as between high-tax Maryland and lower-tax York, Pennsylvania.  Right now, Rhode Island is on the wrong side of most of those balances.

The real shame of that reality is that the Ocean State could make profound gains as an oasis right in the heart of the Northeast — warmer than New Hampshire and with more waterfront, as well as closer proximity to New York City — if only our leaders would put our interests as independent individuals first.

Of course, the deeper “if only” applies to the general public’s finding the will and way to break through the barriers protecting special interests.  That is, we have to empower Rhode Islanders with vision in opposition to those with entrenched power.