Schumer Accuses Bush Of Plot on 'Blue States'
BY MEGHAN CLYNE - Staff Reporter of the Sun
January 20, 2005

Senator Schumer kicked off his membership on the Senate Finance Committee yesterday by accusing President Bush of a scheme to "get back at the 'blue states'" through the tax-simplification initiative the White House is preparing.

Mr. Schumer said "the state and local deduction is the cash cow the Bush team is looking at to fund a lot of what they want to do" in their tax-reform plan. Repealing that deductibility, Mr. Schumer said, would be a "dagger at the heart of New York."

Federal income tax is assessed on an individual's or couple's gross income, minus personal exemptions and deductions. Among the latter are state and local income and property taxes. Paying more in state income tax yields a higher federal deduction, which in turn lowers the amount of federal "taxable income," which reduces the sum that must be paid to the federal government.

Repealing the deductibility of state and local taxes, New York's senior senator said, would affect all Americans, but would disproportionately harm states with high state and local income taxes. Those, he said, tend to be liberal "blue" states, such as New York and California, which he said provide more in local services.

The matter is a national issue, "not just a 'blue state' issue," Mr. Schumer said, "although they would be hurt the worst." He added: "Frankly, some in Washington want it that way."

Because of New York's heavy state income tax - it has seven brackets, with rates ranging from 4% to 7.7% - not allowing New Yorkers to count that burden against their federal income tax obligation would "create a giant sucking sound as the best and brightest workers, and the most productive companies, face incentives to tear up longstanding roots and move to lower-tax jurisdictions," Mr. Schumer said.

He also expressed concern that eliminating the deduction - which he said is worth $37 billion a year to New York taxpayers - would "crush budgets at both the state and local level as officials face pressures to slash spending, which will hurt our teachers, police, and firefighters - let alone the poor, who are already squeezed as it is."

If Mr. Schumer expressed concern about the poor, he also fretted about the effects of the deductibility repeal on the wealthy. "When taxes are too high on the rich, they leave," he said, "and that's bad for the economy."

Leaders of Mr. Schumer's party have repeatedly criticized and obstructed Mr. Bush's tax initiatives on the grounds that they are "tax cuts for the rich."

Mr. Schumer, for his part, criticized the president and other conservatives for being inconsistent in threatening to eliminate the state-tax deduction.

"Economic conservatives say that they hate 'double taxation,' " Mr. Schumer said, citing efforts by the right to eliminate the individual tax on dividends and the estate tax.

"Well, what about taxing labor income under both the payroll tax and the income tax, which hurts most working families?" he said. "That's by far the biggest form of double taxation, yet many conservatives aren't bothered by it, and I haven't seen the president propose a deduction for payroll taxes paid."

"We should be clear and consistent," Mr. Schumer added, saying conservatives opposed double taxation only when it helped their agenda.

In June 2002, Mr. Schumer voted against repealing the estate tax.

Speaking yesterday morning at the New York Marriott Marquis hotel, the senator told members of the association that they had no time to lose in mobilizing to oppose the president on the issue, and he pointed to the group's efforts in 1985 - when they worked against a similar proposal put forth by President Reagan - as a model for action.

Mr. Schumer also said swift mobilization was even more important now than in Reagan's day, because the Bush administration "is more ideologically rigid than Reagan."

And "things move fast in Washington," the senator said. Because Republicans control the presidency and both houses of Congress, time is of the essence, he said, noting that in 1985 Reagan had a Democratic Congress.

Mr. Schumer, apparently, mobilized himself: The senator told the audience he'd spoken with Governor Pataki and with John Breaux, the former Louisiana Democratic senator who recently was named co-chairman of the president's tax-reform commission, to get them to oppose any efforts to do away with deductibility. Mr. Schumer challenged Mr. Pataki to break party ranks and stand up to Mr. Bush on the matter. "This issue is too vital to New York for the governor - or any elected official, Democrat or Republican - to cozy up to anyone," he said.

Near the end of his remarks, the senator encouraged a widespread effort to defend deductibility, saying: "We must make this issue a national call to arms."

At a press session following the speech, though, Mr. Schumer spoke again of his blue-state focus.

"A lot of ideologues in Washington think it's a way of getting back at the state and local governments of 'blue states,'" Mr. Schumer said of deductibility repeal.

A White House spokesman, Ken Lisaius, denied any plot to exact revenge on blue states through the proposed simplification of the tax code.

"The president is the president of all 50 states, and all American people, regardless of political party. He will continue to work with Republicans and Democrats in the Senate and Congress, from red states and blue, to get done the work Americans expect their leaders to do," Mr. Lisaius said.

Whatever Mr. Schumer's fervent pledges to oppose a Bush plan to eliminate the state income-tax deductibility, Mr. Lisaius said the president has never even suggested any such plan.

The process of reforming America's tax code, the spokesman said, is just beginning. He added that the tax-reform panel of which Mr. Breaux is cochairman will be considering how "to simplify the tax code to make it more fair and more pro-growth" and issuing recommendations to the president. "To suggest that someone knows what those recommendations will be before the panel has an opportunity to review the tax code would be premature," Mr. Lisaius said.

A spokesman for the California Department of Finance, H.D. Palmer, agreed that it was too early to issue any judgment about the deduction.

"Our evaluation would be determined on whether this is a stand-alone issue or part of a larger package. We usually don't deal with hypotheticals," Mr. Palmer said.

Even if that package did repeal deductibility, it wouldn't necessarily produce a net loss for New Yorkers, a Manhattan Institute fellow and tax scholar, E.J. McMahon, said.

"Schumer's quote about the blue states is a simplistic analysis, to say the least," Mr. McMahon said. "He might have a point if Bush and Republicans in Congress were talking about eliminating the state and local tax deduction and doing absolutely nothing else."

To David Keating, the executive director of the free-market advocacy group the Club for Growth, simply eliminating the deductibility would provide a valuable incentive for cutting government waste.

The tax code today, Mr. Keating said, makes it so that "people who live in states where things are done efficiently, without a lot of bloat and pork, are subsidizing people who haven't put a leash on their politicians - or politicians who have escaped the leash."

"I think most people would say that this kind of subsidy is a pretty dumb idea," Mr. Keating added.

As for Mr. Schumer's concern about losing businesses and residents to states with more competitive tax rates, Mr. Keating said: "Generally competition is a good thing - competition is how things get better, not worse."

"Whenever protected monopolies are faced with competition, they start screaming - essentially that's what you've got from these high-cost, high tax states," he said.

"New York doesn't seem to realize it's in trouble, and is doing very little to reform the state's finances and tax burden," Mr. Keating said. "The rest of the country is growing faster than in New York. People are leaving the state because of high taxes, and the fastest growing states are those with the lowest tax burdens."

http://www.nysun.com/article/7959

NY'ers already give the federal government more than we receive back -- far more. If we allow this president to squander our money and then pocket rape us by enacting this legislation, then there is something wrong with us.

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"George W. Bush surrounds himself with smart people the way a hole surrounds itself with a donut." —Dennis Miller

From the article you posted:


It seems both you and Mr. Schumer are a bit premature in complaining about a plan that does not exist yet.

So......why should the rest of the taxpayers subsidize New York's high taxes? Because when New Yorkers get to take that off their taxes......they pay less in federal taxes. When they pay less in federal taxes, somebody else has to make up that difference.

Besides.....we haven't yet heard the ENTIRE tax-simplification plan. Schumer's jumping the gun as usual.

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"If the President simply adds a couple of Republican solutions to a trillion dollar health care package that the American people don't support, it isn't bi-partisan. It's political cover," Rep Eric Cantor (R-Va.)

I completely agree with you, JP5. Some states get the majority of their income from sales tax for which the taxpayer gets no deduction.

The tax system should not be in place to provide incentives. Only personal deductions should be allowed.

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The way we get into these scrapes and get out of them, it's almost as though someone was dreaming up these situations; guiding our destiny. ~The Boy Wonder, alter ego of Dick Grayson, young ward of millionaire Bruce Wayne.

I wish this would mean that Bush would raise taxes like his father did. But a simplication of the tax code means a net decrease in taxes people would have to pay even though some aspects would increase. Bush has a continued faith in trickle down economics that his father had the forsight to see wouldn't work. If taxes were actually raised like they were in 1992,1993 under Bush and Clinton, we might have actually seen a quick rebound from the recession like we did in those years. But what Bush is leading to is increased debt without increased revenue. How long do you think this can continue before US bonds lose security because our defecit is so (*)(*)(*)(*) huge?

It is irony that both JP5 come from a state that receives more money from the federal government than it pays and they are complaining about a state that pays far more than it gets back?

If you are such proponents of self-reliance, why don't you write letters to your state government urging it to refuse taking more money from the federal government than you pay? As a tax payer in a state that is supporting you, I have to admit that I am not happy about it.

http://www.taxfoundation.org/newyork...gspending.html

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"George W. Bush surrounds himself with smart people the way a hole surrounds itself with a donut." —Dennis Miller

The real irony is that PJ034 doesn't know how to read the tables on the site he uses as a resource. Sorry, PJ. Texas is a donor state. It's time to try to salvage the shreds of your credibility, but you may have to think.

Hint... You might want to stay away from statistics.

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The way we get into these scrapes and get out of them, it's almost as though someone was dreaming up these situations; guiding our destiny. ~The Boy Wonder, alter ego of Dick Grayson, young ward of millionaire Bruce Wayne.

Yea, you are hilarious. I mistakenly clicked on TN instead of TX. Big deal. It was a simple mistake to make and unlike you and your fellow Bush fans, I am able to admit when I am wrong. You might try it sometime.

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"George W. Bush surrounds himself with smart people the way a hole surrounds itself with a donut." —Dennis Miller

By two cents to the dollar.

But if you did that everytime you're wrong, you'd have almost twice as many posts.

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The way we get into these scrapes and get out of them, it's almost as though someone was dreaming up these situations; guiding our destiny. ~The Boy Wonder, alter ego of Dick Grayson, young ward of millionaire Bruce Wayne.