Government spending amounts to the central planning of precious resources by politicians. Worse, it amounts to the warping of the people and businesses on which it's spent precisely because no one spends the money of others as carefully as they spend their own.
That’s one reason why West Virginia remains poor despite decades of federal government largesse. Contra economists who believe against all logic that government spending powers economic growth, the exact opposite is true. Central planning of goods, services and labor is just as described. It renders any economy worse, by definition. In other words, a little central planning isn’t economically enhancing in the way a lot of central planning isn’t.
Which brings us to California. It’s not the richest state in the U.S. and the world’s 4th largest economy (if a country) because of government spending, rather the government spending is a harmful effect of all the wealth long produced in the Golden State.
Which means the most intriguing “unseen” about California has to do with how much richer it would be if the state and its cities didn’t arrogate to themselves so much of the wealth produced in California through state and local taxes levied. The spending that emerges from this taxation is substantial, and it’s logically a weight on California's prosperity.
This rates commentary amid a debate that surely won’t (and shouldn’t) die about state and local taxation, along with the deductibility of same (SALT). Opponents of deductibility against the federal tax bill claim the latter subsidizes and encourages taxing and spending in California. Well, yes. That's why conservatives should love SALT. It encourages the localization of what's damaging.
Think how much richer California would be absent all the taxing and spending by state and local governments in California. That’s what the right-leaning inside and outside California have been saying all along about the state: it would be much more prosperous without all the taxing and spending there. So true.
Which is a comment that SALT doesn’t subsidize California, and most certainly isn’t evidence of red states subsidizing California waste. Instead, it’s an encouragement of a deeply held right-wing view that per the U.S. Constitution, most taxation should be local so that a free people can choose their policy bliss.
Precisely because government spending is so damaging, and exactly because Californians produce so much taxable wealth, it’s essential that the federal tax code encourage state and local taxation that’s deductible (or ideally credited) against federal taxation so that opposing ideological views in various U.S. states don’t encroach on the people of other states. Put another way, SALT isn’t red states “subsidizing” California taxpayers, it’s red states striving mightily to ensure that California wealth doesn’t fund harmful federal spending throughout the U.S. in the way that spending from Sacramento harms California.
Conservatives routinely talk about Americans escaping taxation, but rarely do they talk about Americans escaping the equally harmful effects of taxation, government spending itself. Which speaks to the importance of SALT, and ideally once again a SALT credit.
While Americans can and do escape excessive California taxation and spending, they can’t escape it as easily if the federal take of wealth is less limited thanks to this peculiar belief on the right that SALT subsidizes California, New York, New Jersey, Illinois, and other high tax states. In taking away a crucial deduction to the betterment of U.S. Treasury’s coffers, conservative members of the right are taking away the ability of Americans to escape the horrors of big government through out-migration from where its cruel effects are most notable.
