Amid the tumult of Donald Trump’s first year in office, Congressional Republicans quietly devised a method to enhance the party’s likelihood of victory in presidential elections long after Trump’s reign is over and his red-hot base cools off. This method involves a lesser-known aspect of the latest amendment to the tax code. The Tax Cuts and Jobs Act of 2017, often described as a tax cut on the 1%, contained within it a cap on the amount of money paid in state and local taxes (SALT) that could be deducted from an individual’s federal income tax. As it stands, individuals can only deduct up to $10,000 in SALT from their federal taxes, whereas previously the amount was unlimited.
It’s admittedly difficult for people to reach an income level where they actually pay more than $10,000 in SALT. There are certain areas of the country, however, that combine high incomes with very high tax rates and are thus greatly affected by the new law.
A good example is Orange County, California. Orange County was once a GOP stronghold where many residents enjoyed a great deal of wealth partly because the SALT deduction shielded these people from taking the full force of California’s 13.3% top marginal income tax rate. When the new tax law passed, it acted as a very significant tax increase on the wealthy in California and other highly taxed states like New York, Oregon, and New Jersey.
Orange County residents did not take this new development in stride. In the 2018 midterms, Democrats pulled off a clean sweep of the county’s six congressional districts, including four red-to-blue flips. It’s almost unheard of for an area to experience voting shifts of that magnitude in that short of a time span. Did Republicans realize the electoral impact that the new tax law could have? If so, why on Earth would they think it was worth it?
The answer is yes, they did know. At a critical time in determining America’s political future, Republicans are playing a high stakes game. Their plan, it seems, is to use the SALT deduction cap to incentivize the migration of high earners from blue states to red states. In particular, red states with little or no state income tax. It’s no coincidence that at the same as the GOP apocalypse in Orange County, the party was weathering the storm in statewide races in Florida, Texas, and Tennessee, states with a 0% income tax. It’s notable that even during a blue wave and despite a historically unpopular Republican president, the GOP was able to hold on to these states, despite being underdogs in both Tennessee and Florida.
It’s clear that in states with a favorable tax rate, Republicans have a winning economic message. In the long term, the party will try to create major population growth in states like these while using the SALT deduction cap to foster an uninhabitable economic environment in the bluest states. When population leaves, so do congressional districts, and therefore electoral votes. The tax law made it clear that the Republican strategy isn’t so much to win new states in the Electoral College but to strengthen the states they already have and weaken the states that they don’t.