Red state lawmakers find blue state piggy bank

Red states are using blue states as their new piggy bank in the GOP Congress.

On big legislative issues such as tax reform and ObamaCare repeal, Republicans in the Senate have sought to redistribute federal funds from New York, New Jersey and other blue states dominated by Democrats to the red states in the South, Midwest and Great Plains that are mostly represented by the GOP.

The most recent example is a GOP tax plan that would limit local and state sales, income and property tax deductions — which would hurt suburban taxpayers in blue states with high property taxes.

{mosads}Republicans are doing away with the deduction because they need to lower the cost of their tax bill, which reduces the corporate tax rate to 20 percent. It just so happens that the major deduction getting the axe delivers big benefits to blue-state taxpayers.

“I think my observation would be yes,” House Democratic Caucus Chairman Joe Crowley (D-N.Y.) said in response to a question about whether he thought Republicans were targeting blue states.

“It is unfortunately a further attempt to divide America when we should be trying to bring it together. The president is dividing America. The Republican Congress and the Ryan-McConnell tax scam bill is going to further divide America if enacted,” he added, referring to Senate Majority Leader Mitch McConnell (R-Ky.) and Speaker of the House Paul Ryan (R-Wis.). 

While the House bill preserves a maximum $10,000 property tax deduction, the Senate tax bill would go even further by completely eliminating the deduction.

The more stringent Senate bill reflects a political reality: There are no Republican senators from the states of California, New York and New Jersey, while in the House, blue-state Republicans won a concession.

Six states claim more than half of the value of the deduction nationwide, according to the Tax Foundation, and four voted for Hillary Clinton in last year’s presidential election: California, New York, New Jersey and Illinois.

Republicans whose districts would be hurt by the elimination of the tax deduction have been vocal in opposing it.

“I look at the idea of eliminating the state and local tax deduction as a geographic redistribution of wealth because you’re taking money from a place like New York to provide deeper tax cuts elsewhere,” Rep. Lee Zeldin (R-N.Y.), one of a handful of GOP opponents to the House bill, said on Fox News last week. 

A few other Republicans have questioned the wisdom of the strategy, even if their own states might not be hurt by the changes.

“There are some taxpayers who are losing exemptions, particularly in high-tax states like New York or California, that could conceivably be paying higher taxes. I think that’s a mistake,” Sen. Ted Cruz (R-Texas) said of the House tax-reform bill.

Tax reform is the second high-profile example of GOP legislation that has dramatically shifted benefits from blue states to red states.

The ObamaCare repeal bill sponsored by Sens. Bill Cassidy (R-La.) and Lindsey Graham (R-S.C.), which GOP senators still hope to bring to a floor vote next year, would have redistributed money from states that expanded Medicaid, which tend to be Democratic, to states that didn’t. 

Some say Republicans aren’t intentionally trying to take money from blue states to shift it to red states. 

“I think it’s too extreme to say that the policy proposals are specifically designed to basically be like Robin Hood, taking from blue states and giving to red states,” said American University professor Capri Cafaro. 

For example, she said, red states that expanded Medicaid would lose federal funding under the health-care bill — including Ohio, Arizona, Arkansas and Louisiana, all of which voted for Trump last year. 

Still, the biggest losers under the health-care plan would be blue states like California, New York, Washington and Oregon. 

“It just looks like the Republicans are taking the money from the Democrat states and giving it to the Republican states,” GOP Sen. Rand Paul (Ky.) said in September, adding that it’s a “game of Republicans sticking it to Democrats.”

Elections have consequences, and it’s hardly unusual for a Republican government to enact policies that deliver benefits to their constituents.

Dan Holler, vice president of Heritage Action for America, a conservative advocacy group in Washington, D.C., said sometimes policies disproportionately hurt states because Republicans and Democrats have different views of government. 

“It’s not surprising that those come in conflict with state policies that are run by the opposing party,” he said.  

“To the extent any of these blue states rely more heavily on certain facets of current law, then I guess I understand why those blue states feel this way. They built their model of government around the federal code, but bad provisions of the federal code.”

He also noted the Obama administration’s policies on coal that had a negative impact on red states like West Virginia. 

“The Obama administration’s crusades to get rid of fossil fuels had a massive impact on red states. I don’t think they were trying to punish red states. They were just trying to get rid of fossil fuel usage. The impact on that was disproportionate on red states,” he said.

Jacob Leibenluft, a senior adviser with the Center on Budget and Policy Priorities, said the GOP tactics have a political logic.

“The ideological argument Republicans have against Medicaid and Medicaid expansion, that Republicans have against [the state and local tax deduction] … they can marry that ideological argument with policies that are going to disproportionately hurt states more represented by Democrats than Republicans,” he said,

But the confluence of the health-care and tax bills strike some observers as being something new.

“It feels to me like it’s a new strategy, certainly at the national level. I can’t think of previous reform efforts that had such a wide distributional effect across the states,” said Topher Spiro, the vice president for health policy and a senior fellow for economic policy at the liberal-leaning Center for American Progress in D.C.