When Democrats “Soak The Rich” Strategy Does Not Work

As the Democratic led House of Representatives passes bill after bill to raise taxes on Americans, their brothers and sisters in the states are doing just the opposite.

Nowhere was this clearer this year than New Jersey. The recently concluded legislative session saw the super-majority dominated Democratic legislature go to war with Governor Phil Murphy over raising taxes on those evil “millionaires.”

Murphy had campaigned in 2017 on taxing millionaires and had pushed for it in 2018. But, this session, Murphy pushed the Democratic super-majorities in the legislature to pass a three to five percent surcharge on income over a million.

Senate Majority Leader Stephen Sweeney, who allowed his chamber to vote to approve a millionaire tax multiple times under his tenure when Republican Chris Christie was in charge, refused to allow the Governor’s plan to come to fruition.

The reasons were simple. New Jersey had lost thousands of taxpayers since 2018 and property taxes remain sky-high (even after then Governor Chris Christie and the legislature agreed to major property tax relief legislation). Further, President Trump’s 2017 tax overhaul meant these high property and even higher income taxes could not be deducted off federal returns. For once, state politicians had to deal with the messes they created and not have the federal tax code bail them out.

The session was marked by the Governor and Sweeney calling each other out and going to war in the papers. While a budget was finalized and signed on-time, it did not include what Murphy wanted most and the legislature and Governor remained at war with each other.

Short of Illinois, in state after state, Democrats have been unable or unwilling to use their majorities to pass major income tax increases. Sure, there have been cases where in WA State and California, the Democratic legislatures have done this via fee increases, gas tax increases and other means but vaunted and massive tax increases on the wealthy have not panned out.

This stands in stark contrast to what their compatriots want to do at the federal level where a minimum wage increase has passed, the Green New Deal has been introduced and several single-payer bills which would vastly increase taxes are being debated. In California, even Democrats have admitted UHC is a pipe-dream. But, this does not stop them from spending millions on free healthcare for illegals.

Traditional blue states, such as Illinois, New York, New Jersey and Connecticut, have been bleeding population and taxpayers. The soak the rich mantra does not work when even there are even fewer taxpayers to tax. Combined with even cash rich states such as California having a hollowed out middle class, tax hikes just are not feasible in blue states anymore.

Contrast this with a multitude of growing red states, from Idaho to Utah to Texas to Florida. All have seen major tax cuts or have tax limitations on the books and are some of the fastest growing states in the nation. With a growing tax base, these states do not even have a major need to pass major tax increases.

You can also contrast this with other growing states like Nevada and Colorado which are nominally purple but consistently blue.  Colorado has a property tax limitations on the books.  Nevada does not have an income tax (like WA State).  Red states from Idaho to Texas have tax limitations on the books.

Of course, this has not stopped Democrats from calling for major tax hikes.  Have to make the base happy after all.  But, even in the era of Trump, Republicans remain in strong positions in these demographically and politically changing states allowing them to limit local tax and fee increases.

Likely, it suits blue state politicians electoral needs to blame Trump and the consequences of the tax cuts. But they also know they cannot continue to afford to lose the few high income taxpayers they have left, after decades of fiscal mismanagement and catering to public employee unions, have hollowed out states middle classes.  Unfortunately, the party’s activist  wing fails to understand taxing a select few even more will likely lead to worse outcomes. Regardless, it is stunning even Democratic led states have failed to live up to their national counterparts calls to make the rich pay their fair share.


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