As we all have heard, the “Bush Tax Cuts” will expire on December 31 and much higher tax rates will arrive on New Year’s Day. This current Democrat controlled Congress continues to talk about “taxing the wealthy.” The irony of the tax increase that arrives on January 1 is that it will hit the residents of high income, Democrat leaning states like California, Connecticut, New Jersey and New York the hardest. This is a problem for pro tax Democrats.
But fear not, Representative Jerrold Nadler (D-NY) wants to fix this injustice. He has proposed a bill called the Tax Equity Act, which would "require the IRS to adjust tax brackets proportionally in regions where the average cost of living is higher than the national average."
In other words, the various tax brackets would apply to residents in certain regions at higher income levels versus other parts of the country. A family with an income of $100,000 or even $1 million in Manhattan would pay less federal income tax than a family with the same earnings in rural America.
"The basic costs of life in the New York region are much steeper than in most parts the country," says Mr. Nadler. "The reality is that a dollar in New York isn't worth nearly as much as a dollar in Spokane or Knoxville or Topeka. It's time for our tax code to take reality into account when assessing someone's tax liability."
The irony of the higher cost of living in large urban areas has a lot to do with higher sales and property taxes, union work rules and more regulations. These business/jobs killers make it more expensive to produce, sell and buy things. Mr. Nadler fails to mention that the federal tax code already benefits high-cost states through the deductibility of state income, local income and property taxes.
Is it only me or does it seem unjust to penalize a family that chooses to live in small town America with a pro-business state and local government (which help hold down the cost of living)? Should Americans in different parts of the country have different federal rates? What does fairness in the tax code mean to you? I would love to hear your thoughts.
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