With their enthusiastic backing of President Obama and the Democratic Party on Election Day, the bluest parts of America may have embraced a program utterly at odds with their economic self-interest. The almost uniform support of blue states’ congressional representatives for the administration’s campaign for tax “fairness” represents a kind of bizarre economic suicide pact.
Any move to raise taxes on the rich — defined as households making over $250,000 annually — strikes directly at the economies of these states, which depend heavily on the earnings of high-income professionals, entrepreneurs and technical workers. In fact, when you examine which states, and metropolitan areas, have the highest concentrations of such people, it turns out they are overwhelmingly located in the bluest states and regions.
Ironically the new taxes will have relatively little effect on the detested Romney uber-class, who derive most of their income from capital gains, taxed at a much lower rate. They also have access to all manner of offshore dodges. Nor will it have much impact on Silicon Valley millionaires and billionaires, or the Hollywood moguls and urban land speculators who constitute the Democratic Party’s “good rich,” and enjoy many of the same privileges as their wealthy conservative counterparts.
The people whose wallets will be drained in the new war on “the rich” are high-earning, but hardly plutocratic professionals like engineers, doctors, lawyers, small business owners and the like. Once seen as the bastion of the middle class, and exemplars of upward mobility, these people are emerging as the modern day “kulaks,” the affluent peasants ruthlessly targeted by Stalin in the early 1930s.
The ironic geography of the Democratic drive can be seen most clearly by examining the distribution of the classes now targeted by the coming purge. The top 10 states with the largest percentage of “rich” households under the Obama formula include true blue bastions Washington, D.C., which has the highest concentration of big earners, Connecticut, New Jersey, Maryland, Massachusetts, New York, California and Hawaii. The only historic “swing state” in the top six is Virginia, due largely to the presence of the affluent suburbs of the capital. These same states, according to the Tax Foundation, would benefit the most from an extension of the much-lambasted Bush tax cuts.
The pattern of distribution of “the rich” is even more marked when we focus on metropolitan areas. Big metro areas supported Obama, particularly their core cities, by margins as high as four to one. Besides New York, the metro areas with the highest percentage of high-earning households include such lockstep blue cities as San Francisco, Washington, San Jose, Atlanta and Los Angeles.
The income tax hit may not be the only pain inflicted on these areas in the President’s drive for greater “fairness.” Moves to curb mortgage interest deductions for affluent households also would fall predominately on these same areas. The states with the highest listing prices — and the biggest mortgages on average – are the president’s home state of Hawaii, followed by the District of Columbia, New York, California and Connecticut. According to the Census Bureau and the Federal Housing Agency, median home values in California are 200% higher than the national median, and in New York they’re 150% higher; in contrast, red Texas’ prices are below the median.
The contrast in prices is even greater between metropolitan areas. The highest prices — and thus largest mortgages — are in the deep blue havens of San Francisco, New York and Los Angeles. If the mortgage interest deduction is capped for loans, say, over $300,000, homeowners in these cities will suffer far more than in key red state cities like Dallas or Houston, where homes are at least half the price.
The curbing of the mortgage interest deduction constitutes only one part of a broader effort to cut back on all itemized deductions. This would hit states with the highest rates of people taking such deductions: California, New York, the District of Columbia, Connecticut and New Jersey, according to the Wall Street Journal. In contrast, the states least vulnerable to this kind of leveling reform would be either red states such as Indiana, Alaska or Kentucky, or classic “swing” states such as Iowa and Ohio.
Of course, one can argue that these changes follow the precepts of social justice: Rich people and rich regions should pay more. Yet being “rich” means different things in different places, due to vast differences in costs of living. The cost of living in New York and Los Angeles, for example, is so high that the adjusted value of salaries rank in the bottom fifth in the nation. In other words, a couple with two children with a $150,000 income in Austin or Raleigh may be, in terms of housing and personal consumption, far “richer” than one making twice that in New York or Los Angeles.
What would a big tax increase on the “rich” mean to the poor and working classes in these areas? To be sure, they may gain via taxpayer-funded transfer payments, but it’s doubtful that higher taxes will make their prospects for escaping poverty much brighter. For the most part, the economies of the key blue regions are very dependent on the earnings of the mass affluent class, and their spending is critical to overall growth. Singling out the affluent may also reduce the discretionary spending that drives employment in the personal services sector, retail and in such key fields as construction.
This prospect is troubling since many of these areas are already among the most unequal in America. In the expensive blue areas, the lower-income middle class population that would benefit from the Administration’s plan of keeping the Bush rates for them is proportionally smaller, although the numbers of the poor, who already pay little or nothing in income taxes, generally greater. Indeed, according to a recent Census analysis, the two places with the highest proportions of poor people are Washington, D.C., and California. By far the highest level of inequality among the country’s 25 most populous counties is in Manhattan.
Finally we have to consider the impact of the new tax rates on the fiscal health of these states. Four of the five states in the poorest shape fiscally, according to a recent survey by 24/7 Wall Street, all have congressional delegations dominated by Democrats — California, New Jersey, Rhode Island and Illinois (the one red state is Arizona). Slower economic growth brought about by higher taxes — compounded by high state taxes — is unlikely to make their situation any better.
So what can we expect to happen if the fiscal cliff appears, or if the President and his party get their taxes on the rich? One can expect a proportionally greater impact on citizens and the budgets of the already expensive, high-tax states, where the new kulak class is concentrated. It may also spark a greater migration of people and companies to less expensive, lower-tax areas.
Perhaps the greatest irony in all this is that the Republicans, largely detested in the deep blue bastions, are the ones most likely to fall on their swords to maintain lower rates for the the mass affluent class in the bluest states and metros. If they were something other than the stupid party, or perhaps a bit more cynical, they would respond to the President’s tax proposals by taking a line from their doddering cultural icon, Clint Eastwood: make my day.
Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and contributing editor to the City Journal in New York. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.
This piece originally appeared at Forbes.
Income tax photo by Bigstock.
Comments
47 responses to “The Blue-State Suicide Pact”
I hate all that crap about it’s “fair” to expect the rich to pay more. Again, the left has bastardized a word, and “fair” becomes some slippery term that has no static meaning, but merely fluctuates according to the left’s ideological requirements at that moment. That being said, I’m with Joel: go ahead and raise those rates.
Sticking it to the blue-staters who seem to be practically begging for it is one reason, but I want to see what’s next after Obama and the democrats get them. Anybody with an IQ over room temperature knows the money raised from raising those rates isn’t going to do one meaningful thing (other than continue the class warfare). So, then what? Obama gets his pittance, and in a few short months the left will be back whining that the problem is worse than they thought (no kidding), and that the “fortunate” need to be paying more – paying their new “fair share.” It’s money in the bank.
World’s Best Recruitment agencies in Pakistan, Recruitment Vacancies Agency in Pakistan candor consultancy Group (Pvt) Ltd. candor manpower Recruitment Business Management Outsourcing Group Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Candor Group is one of the staffing companies which collaborates with clients to help them become high-performance businesses and Governments. candor services Group (Pvt) Ltd. professionals prepare a confidential candidate assessment report, which is then presented to the client for review. We are competing with staffing companies in the world. Human are the most important tool in Candor Recruitment Group Pakistan. Resourcing & Recruiting the most suitable manpower is the crucial part for companies.
A couple of comments I made on another blog. I didn’t think they were so good but others did:
@ Dark Enlightenment and the idea that all men are NOT created equal
I think this is a fundamental misunderstanding of what equality means. As a metaphor think of it in terms of a family (with God the father and we — the people — the children 😉 ). Parents know full well that not all their children are equal but this does not stop them from being equally concerned with the welfare of them all. A retarded child might need more care than there normal middle child, while it might also make sense to devote more resources to the education of the smart one because of the expected economic return, which can be used to finance the care of the one with Down syndrome.
I know, I know, America (and the world) is not a family, but nevertheless this is the way our government can think when it thinks about the general welfare of “we the people.” The happiness of its people in this and succeeding generations is the object of government, according to 18th century Englightenment standards, and the greatest happiness of the greatest number (of people already here!) is the best you can do. We already think this way (well, not libertarians and a lot of self-identified conservatives, but I’ll come back to them.
Thus the declining marginal utiliity of income (a dollar worth more to a poor man than a rich one) is the grounds on which we justify progressive taxation and programs like the earned income tax credit, which is essentially a graduated wage subsidy for low-income, less productive workers.
Now back to those liberarians and conservatives (I know you are out there) who way the money is theirs, they earned it and by God they want to keep it. Least of all do they want to see the government take it away from them and give it to some lazy proles, many of Mexican and African descent.
The counterargument is this: smart people with good educations are not productive just or even mainly because they are smart, well-educated, hard working, and devoted to their careers. This is obvious when we remember that people who were just as smart and well-educated and even harder working a century ago were not nearly as productive nor as well paid as they are today.
The reason of course is capital. Accumulated capital is the source of perhaps 99% of the total productivity of a modern society. This applies to the rich as well as the poor and, if anything, applies to the rich more than the poor. But where did capital come from. Not to put to fine a point on it, it was wrung out of the sweat and the toil of the ancestors of today’s low-wage proles for the most part. Sure, it was saved and invested by other men — good job? — but that doesn’t take away from its ultimate origins. Peasants did most of the heavy lifting.
So you see, these poor simple peoiple have a claim on the total productivity of society, not just the little slice the market awards them. It is their inheritance from their ancestors. Rougly put I know but that is the nub.
lukelea (@lukelea)
12/02/2012 at 8:34 PM
That was supposed to be good job! Not good job? Those Calvanists did a real service to mankind and modern businessmen continue that tradition to this day. But they are the stewards of capital not its absolute owners. They have a claim to a share of the usufruct in proportion to how well they manage it, but not to the whole of it. It’s like Jesus said in the parable of the talents. Managing capital is a sacred trust.
All this is not just my personal opinion. I am speaking out of the Judeo-Christian tradition. You know, the one that guided the Founding Fathers and the men and women who fought and won the Civil War (thank you Harriet Beecher Stowe and Julia Ward Howe and just about everybody else whose posterity we are.
And to those who disagree? I could say f …., no, I should say America, love it or leave it.
Luke Lea
Obama got a big chunk of his votes from those who will pay more under his plan. It seems like they’re getting what they said they wanted. I want to thank these people for sacrificing for the rest of us. I just wish their sacrifice could be put to better use…
Smart Reps will let the Clinton rates come back for (high) ordinary incomes and use that to make the rest of the government’s impact more growth-friendly. Win win!
Obama got a big chunk of his votes from those who will pay more under his plan. It seems like they’re getting what they said they wanted. I want to thank these people for sacrificing for the rest of u
writing a phd research proposal
It was doubtful that higher taxes will make their prospects for escaping poverty much brighter. For the most part, the economies of the key
Dog Life Jacket
I am very interested in what you write. I think I can understand a lot for me to learn better.
Sarong
Hillview Peak has full and unique facilities, which includes a guard house, clubhouse, children’s playground, swimming pool, Aerobic/Yoga room, piano room, pool room, indoor gym, hydrotherapy beds, hydrotherapy baths, reading room, function room, onsen, jacuzzi.
Hillview Peak
The income tax hit may not be the only pain inflicted on these areas in the President’s drive for greater “fairness. free cell phone spy software
cell phone spyware
When you have nice post then content helps you with latest information. here it is the same situation, i have new tips to reduce your fat in most quick way. Fatlossprofessional
Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything – all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important.
case study for mba students
We’ve demonstrated a strong track record of being very disciplined with the use of our cash. We don’t let it burn a hole in our pocket, we don’t allow it to motivate us to do stupid acquisitions. And so I think that we’d like to continue to keep our powder dry, because we do feel that there are one or more strategic opportunities in the future.
paraphrasing sentences
Future residents are within a short driving distance to Ang Ko Kio Hub and Compass Point. With such a short drive to the city area as well as the orchard and bugis area, entertainment for your love ones and family will come at a stone’s throw away.
Ang Mo Kio Cluster House
It was really a hard way to avoid it. 17 again jacket
Think twice before you speak, because your words and influence will plant the seed of either success or failure in the mind of another.
http://www.pdasegment.com
Future residents will be able to walk to Jurong East MRT Station which is located right beside it. Also, nature awaits your family and friends at the Jurong Lake Park and the Jurong Country Park. Also, the ultimate nature awaits you the Japanese Garden.
Jurong Gateway
Always bear in mind that your own resolution to succeed is more important than any other.
audio transcription
I’m glad I found this web site, I couldn’t find any knowledge on this matter prior to.Also operate a site and if you are ever interested in doing some visitor writing for me if possible feel free to let me know, im always look for people to check out my web site.
http://casinovietnam.org
Positive site, where did u come up with the information on this posting? I’m pleased I discovered it though, ill be checking back soon to find out what additional posts you include.
With This Favor
WOW..!! this one is very Wonderful Post and i feel obligated to read this article…..you have put a very good issue forward….. there is a news
about Medical Alert System…..keep posting and sharing such interesting posts….
DUO Residences is a new and upcoming condominium located in the Bugis area, right next to Bugis MRT. It is within a short drive to Little India, Orchard and city area. With expected completion in mid 2017, it comprises of 660 units of prime residences, 21 storeys of Grade A Offices, a five-star and close to 80,000 square feet of retail space.
DUO Residences
amazing cover letters jimmy sweeney Amazing Cover Letter Creator: A Point And Click Solution To Writing Attention Grabbing, Interview-Landing Cover Letters. This site is a leading resource for information about the Jimmy Sweeney Amazing Cover Letters PDF book and cover letter software that teaches you how to use “secret sales ingredients” to land more interviews and get your foot in the door using point and click cover letter customizations.
how to build a cat tree Best Cat Tree Plans Ebook: How To Make A Cat Tree Your Kitty Will Love Easily And Affordably…Even If You Don’t Have A Clue Where To Start. This site is a leading resource for information about the Best Cat Tree Plans PDF book and complete diy cat tree construction guide that teaches you how to build more than 11 different types of cat trees using detailed, step-by-step instructions direct from the manufacturer.
You might post on the style for the blog. You should key in that it’s killer. Your blog outcome will enlarge your viewers
more info
Proper education for Sustainable Development is must . It should include key sustainable development issues into teaching and learning.
top surgical residency programs
Great Post. I have not been visiting the Fernvale and Sengkang EC site recently. Took a visit again and there were some great comments on the site. Excellent post.
Keep up the good work.
Sengkang West Way EC
rebelmouse.com Fat Loss Factor: Eat The Foods You Love And Still Get The Stunning Body You Deserve. This site is a leading resource for information about the Dr Charles Fat Loss Factor PDF book and weight loss system that teaches you how to burn fat to sculpt an incredible body while still enjoying many of the foods that are supposed to make you fat.
flavia del monte all belly pregnancy All-Belly Pregnancy Program: How To Eat And Exercise When Expecting To Stay Fit, Have A Strong, Healthy Baby, And Be One “Hot Mama”! This site is a leading resource for information about the Ryan Watson and Flavia Del Monte All Belly Pregnancy PDF book, diet manual, and exercises for pregnant women that help you carry your pregnancy weight with ease, prepare you for giving birth and beyond, and help you keep your baby healthy and happy inside the womb.
Vue 8 Residence is a 99-years leasehold Seaview Pasir Ris condo development located within the beachfront landed housing enclave at Pasir Ris Heights. Vue 8 Residence has full and unique facilities, which includes a guard house. Vue 8 Residence is also near Downtown East, the shopping, dining and entertainment hub which is scheduled to open in 2 years time. Entertainment for your loved ones and friends are therefore at your fingertips with the full condo facilities as well as the amenities near Vue8 Residence. Vue 8 Residence will be accessible with Pasir Ris MRT Station as well as Pasir Ris Bus Interchange. It is also right beside Tampines Expressway(TPE). eCoPolitan is a 99-year Leasehold executive condominium located along Punggol Way / Punggol Walk, in District 19. eCoPolitan at punggol will comprises of 512 units. eCoPolitan ec is near close to Punggol MRT Station and Sengkang MRT Station. Schools that are close to eCoPolitan include, Compassvale Secondary School and Edgefield Primary School. Residents at Ecopolitan EC can get to nearby supermarkets or shopping mall within the area for an array of amenities such as grocery and retail shopping, banks, eateries and etc. eCoPolitan will also be near to Waterway Point. Lush Acres EC Executive Condo is located at the junction of Sengkang West Way and Fernvale Link, this dev’t site is a short walk away from the Layar LRT. Lush Acres EC will be located along Seng Kang West Way and Fernvale Link, providing a condominium housing of 380 units. In view of the housing needs of potential Executive Condominium home owners
Kensington Square is a new and upcoming condominium located in the Bartley area, right next to Bartley MRT. It is within a short drive to Little India, Orchard and city area. With expected completion in mid 2017, it comprises of 141 Residential units and 57 commercial units.
Kensington Square
I’m impressed by the details that you¡¦ve on this web site. It reveals how nicely you understand this subject…..I just stumbled upon your blog and wanted to say that I have really enjoyed reading your blog posts….thanking….Exceptional site here….
http://nuvoryn.dealsperday.com
Kensington Square is a new and upcoming condominium located in the Bartley area, right next to Bartley MRT. It is within a short drive to Little India, Orchard and city area. With expected completion in mid 2017, it comprises of 141 Residential units and 57 commercial units.
Kensington Square
Great post i must say and thanks for the information.I am glad to visit your blog site, Thank you so much for sharing this one. I hope to see more content sharing this one. Keep on posting!I’m glad to visit your blog site… Exceptional site here http://www.marketwire.com/press-release/-1809659.htm
The post is nicely written, and it contains many good things for me. I am glad to find your impressive way of writing the post. Now it’s become easy for me to implement and understand the concept. Thanks for sharing this post.Coral@Keppel Bay
dpristine video
Sea Horizon EC is a new and upcoming executive condo located in Pasir Ris Rise and Pasir Ris Drive 3 area, within a short walk to Downtown East and a short drive to Pasir Ris White Sands.
Sea Horizon EC
homepage Sea Horizon EC is also near elite schools such as Hai Sing Catholic School and Casuarina Primary School. Dunman Secondary School, Meridian Junior College and Tampines Junior College are also around in the area…
here Get the latest version of the RealPlayer free video player from one of the most trusted video companies on the Internet, Real.com.
It’s a really nice post and what a great content and information.
Burton Mendonsa
Your blog provided us with valuable information to work with. Each and every tips of your post are awesome. Thanks a lot for sharing. Keep blogging.
TP180 Guocoland
http://www.youtube.com/watch?v=Lu4IUfW2qK4
I have browsed most of your posts. This post is probably where I got the most useful information for my research. Thanks for posting. Conical Springs Garter Springs Spiral Springs Metal Stampings Heavy Duties Springs Disc Springs Extension Springs Tension Springs
This is really wonderful and amazing post to reading. The post is full of relevant information that is easily understood & highly admirable. I really enjoy reading these great articles.
http://handyortung.iter-boundary.de
Great Post. I have not been visiting the Fernvale and Sengkang EC site recently but I was there a week or two ago. Local SEO Services Took a visit again and there were some great comments on the site. Excellent post. And it is much aopreciated, this site can tell you more about the pact
I just got to this amazing site not long ago. I was actually captured with the piece of resources you have got here. Big thumbs up for making such wonderful blog page! Grating Manufacturer Junction Box Transmitter Enclosure FRP Push Button
This is a nice blog. Good clean UI and nice informative blog. I will be coming back soon, thanks for the great blog. pasang iklan kompas
I originally saw this on Forbes, and loved it. This is a great site here SEOjus
I am so glad that you guys re-posted it here, because I really wanted to read it again. Thanks so much.
Such a very useful article. Very interesting to read this article. I would like to thank you for the efforts you had made for writing this awesome article.
SEO packages
manual social bookmarking
Hurrah! Finally I got a website from where I be able to truly obtain helpful facts regarding my study and knowledge.
Buy backlinks
high pagerank backlinks