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Reagan Legacy

In Wake Of Federal Tax Reform, Blue States Scramble To Hide High Taxes

By Kyle Samminthe Federalist

Since the Tax Cuts and Jobs Act became law in 2017, government officials in high-tax states have been frantically trying to find a way to overturn the provision that limits taxpayers’ deduction for state and local taxes to $10,000. That limit makes taxpayers in high-tax jurisdictions feel the impact of their local governments’ tax-and-spend policies more keenly, and those governments will do anything (short of actually cutting taxes) to prevent that from happening.

First they resorted to weird workarounds that will surely be ignored by the Internal Revenue Service and struck down by the courts as the ruses that they are. Then they sued in federal court to stop Congress from changing the tax law. The lawsuit is without merit—it’s so bad, even California declined to join it.

Now at least one state, Connecticut, is considering radically reordering its tax system in a way that will be objectively worse for its citizens, all to spite the federal government. Sooner or later, these tricks will be used up and the high-taxing states will have to face reality.

Like It Or Not, The Government Can Tax All Income

Any analysis of the federal income-taxing power must begin with the Sixteenth Amendment to the Constitution, which is brief but sweeping: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” While Article I always gave Congress the power to impose direct taxes, the Sixteenth Amendment removed the constitutional restrictions on that power that made its exercise practically impossible.

That power, with the pre-1916 restrictions removed, is as broad as it gets. If you have income, the federal government can tax it. From the beginning, courts have recognized the sweeping nature of the Sixteenth Amendment and, in 1955, clarified further just how broad the amendment is in the landmark case of Commissioner v. Glenshaw Glass Co. In that case, the upheld the Internal Revenue Code’s definition of income as being truly “all-inclusive.”

To admit this does not require an endorsement of high taxes, or indeed of any taxes at all. To say that the government can tax all income does not mean you think they shouldtax all income. It is only to admit a fact that, until recently, Democrats were especially fond of acknowledging: the government has the power to tax your income.

Admitting that also does not mean that the government must tax all income. We have never had a truly flat tax. The 1916 Revenue Act, for example, allowed a deduction for foreign taxes as well as state and local taxes (commonly abbreviated as SALT). It also contained deductions for depreciation, depletion, and interest that are similar to those still in the code.

But none of these deductions were a matter of right; they were legislative choices, undertaken to reduce the burden of taxation in ways that Congress thought made the income tax fairer. That’s a fine idea, but it does not create an inalienable right to that tax deduction.

State-Level Tax Evasion

Connecticut’s plan to beat the system is clever—too clever, really. Jared Walczak of the Tax Foundation explained the details in a recent article: “the state’s graduated-rate income tax would be largely replaced by a 5 percent payroll tax, plus an additional 2 percent tax on income above $200,000, which would raise more money than the current income tax. The state’s Earned Income Tax Credit (EITC) would be increased to offset the higher tax liability for low-income earners, and because the payroll tax is a deductible expense for businesses, taxpayers subject to the $10,000 [SALT] deduction cap would get a federal tax cut even as the state generates more money.”

Walczak’s article points out the main problems with the complicated proposed tax structure. Getting the thing to work at all without creating bizarre incentives is a problem. For example, a payroll tax with multiple brackets will inevitably require massive end-of-year adjustments for anyone working multiple jobs. It also results in a different tax structure for wage workers and independent contractors, as well as people who live off investments.

Does the Nutmeg State really want to shift the tax burden away from one group of people based purely on the terms of their employment? If so, regular jobs are going to shift to other states and freelancers are going to move in, creating a hole in the state budget. The idle rich will come out ahead, too, as their non-wage income becomes non-taxed.

That’s a strange thing for a supposedly liberal state to do, but ordinary concerns fly out the window when the overriding goal of thwarting the president enters the equation. Democrats have made a cottage industry out of saying richer people need to pay more taxes. When that becomes slightly true because of a Republican initiative, however, all of the well-heeled blue staters want to use corporations to hide income from the federal government.

Eroding Federalism For a Century Comes Back To Bite 

The pending case of New York v. Mnuchin, to which Connecticut is also a party, makes even less sense. The attorneys general of these four high-tax states suggest that the federal taxing power was never intended to interfere with the states’ taxing power. There is no citation for this point, which tells you about all you need to know: the claim is invented out of thin air.

The idea that the reduced SALT deduction impairs the states’ taxing power is also nonsensical; the states retain the power to tax, they just can’t use a federal deduction to hide how high their taxes are. As Joseph Bishop-Henchman wrote for the Tax Foundation, “Tax deductions and carve-outs are a matter of legislative grace.”

Even the idea that federal taxation must exempt all state taxes is unsupported by history. Bishop-Henchman cites several instances when the deduction was limited, including in 1964, 1969, 1986, and 1993. And from the start, federal tax never completely excluded state and local taxes: it was a deduction, not a credit. While taxpayers did not pay taxes on the portion of their income that they paid to their state, they did not get a full credit for that amount, either. The deduction only saves the marginal rate on the income devoted to state taxes—the fraction of the fraction.

The complainants say that “at ratification, it was widely understood that the federalism principles enshrined in the Constitution would serve as a check on the federal government’s tax power.” That’s true, but not in the way they think it is.

Federalism did result in informal limits on federal power, but only because the states, represented in the Senate, kept the federal government from fully exercising its powers at their expense. If those limits have been eroded in the past century, it is because progressives went out of their way to erode them, first by requiring the direct election of senators and later by appointing judges who allowed them to ignore all limits on federal power, written and unwritten.

These same progressives now want you to believe that one of those unwritten, informal restrictions must override the law. The change of heart is cynical, if predictable. Rich people in high-tax states are paying more federal tax, not because the federal tax rate has gone up, but because Congress decided to stop helping the states hide the effect of their unsustainable tax-and-spend policies. Those who destroyed the norms of federalism now wish the courts to re-erect them—but only insofar as it helps their friends.

It’s Not Fair!

All of these lawsuits and legal hedges are rooted in the same complaint: the rich blue states want to keep imposing high taxes on their people and want the federal government to help them obscure the consequences.Their argument here is that imposing the same rule on all taxpayers is unfair.

“By decreasing state tax revenue and making state taxes more expensive,” they write in the complaint, “the new cap on the SALT deduction will ultimately force the Plaintiff States to choose between maintaining or cutting their public investments and level of services, and the taxes supporting them. As such, the new cap on the SALT deduction directly and unfairly interferes with the Plaintiff States’ sovereignty, by depriving them of their authority to determine their own taxation and fiscal policies without federal interference.”

Their argument here is that imposing the same rule on all taxpayers is unfair. That’s a definition of “unfair” that only a small child could love. What it really means is, “I didn’t get what I want.” What they want, as the complaint plainly acknowledges, is to avoid making hard choices to balance their budgets. Every other state has had to make hard choices, but these four states don’t want to. Unfair!

Even if it were true that the law is unfair, this would be a political argument, not a legal one. Politicians on the far left want the courts to impose rules that the people and their legislators have rejected. Even their own statements confuse to whom exactly the law is unfair.

New York Gov. Andrew Cuomo attacked the tax law as one “that benefits the 1% at the expense of middle-class families.” But the loss of the deduction hits only those families who pay more than $10,000 in state and local taxes—hardly the average Joes Cuomo awkwardly attempts to evoke.

That’s Not How Any of This Works

This lawsuit will fail, and Connecticut’s too-clever workaround probably will, too. What happened in the Tax Cuts and Jobs Act of 2017 was a result that politicians from these four states found distasteful. It will force them to make the kind of hard choices that they were elected to make. It will make their previous bad decisions more obvious to their voters and put pressure on them to fix them. It will, in short, force them to govern.Twenty-first-century politicians will do nearly anything to avoid governing.

Twenty-first-century politicians will do nearly anything to avoid governing. The arguments are flimsy at best, and the remedy is uncertain. Asking the courts to strike down the partial limitation of a tax deduction is novel enough, but what comes in its place? Do they want the courts to impose taxes directly, an act that is at the core of a legislature’s functions?

They know this lawsuit is a damp squib, a feeble attempt to show the folks back home (and especially their rich donors) that they’re “doing something” to stop taxes on the rich from going up. Connecticut’s radical reform is somewhat better thought-out, but will certainly inflict unintended consequences on that state’s already struggling economy, even if the IRS doesn’t decide to ignore the whole shell game they are playing.

Like a child throwing a tantrum, they will flail and kick for as long as they can before finally having to do what they were elected to do: set a level of taxing and spending that their people can afford.


Ilhan Omar’s Big Lie

By Rich Lowry • National Review

The Left distorts what happened in El Salvador in the 1980s.
In a viral exchange at a congressional hearing last week, the new congresswoman from Minnesota, Ilhan Omar, who is quickly establishing herself as the most reprehensible member of the House Democratic freshman class despite stiff competition, launched into Elliott Abrams. She accused the former Reagan official and Trump’s special envoy to Venezuela of being complicit in war crimes.

“Yes or no,” she demanded, “would you support an armed faction within Venezuela that engages in war crimes, crimes against humanity or genocide, if you believe they were serving U.S. interest, as you did in Guatemala, El Salvador, and Nicaragua?”

Omar was cribbing from the Left’s notes on U.S. Latin American policy, and doing it badly. She made much of the 1981 El Mozote massacre in El Salvador. The idea that Abrams is somehow directly implicated in this bloodcurdlingly awful event is completely absurd. Continue reading


Ronald Reagan Lecture Series presents George Landrith of the Freedom Foundation


Bill O’Reilly slanders Ronald Reagan

by George F. Will      •     Washington Post

Donald Trump is just one symptom of today’s cultural pathology of self-validating vehemence with blustery certitudes substituting for evidence. Another is the fact that the book atop the New York Times nonfiction bestseller list is a tissue of unsubstantiated assertions. Because of its vast readership, “Killing Reagan: The Violent Assault That Changed a Presidency” by Fox News’s Bill O’Reilly and his collaborator, Martin Dugard, will distort public understanding of Ronald Reagan’s presidency more than hostile but conscientious scholars could.

Styling himself an “investigative historian,” O’Reilly purports to have discovered amazing facts that have escaped the notice of real historians. The book’s intimated hypothesis is that the trauma of the March 1981 assassination attempt somehow triggered in Reagan a mental decline, perhaps accelerating the Alzheimer’s disease that would not be diagnosed until 13 years later. The book says Reagan was often addled to the point of incompetence, causing senior advisers to contemplate using the Constitution’s 25th Amendment to remove him from office. Well. Continue reading


Ronald Reagan’s Thanksgiving Day Messages

“We have seen the splendor of our natural resource spread across the tables of the world, and we have seen the splendor of freedom coursing with new vigor through the channels of history.” 

by Scott L. Vanatter

Ronald Reagan believed in America. He believed in America’s promise. He saw the best in his fellow Americans. We, too, believe in America, its promise, and see the best in our fellows.

At the beginning of our republic, President George Washington declared a Day of Thanksgiving his first year in office. In the midst of the sore trials of a massive Civil War, President Lincoln established a regular Day of Thanksgiving.

In the spirit of his predecessors, and while he tackled serious economic and foreign policy challenges, President Reagan delivered a series of eight Thanksgiving Day messages from 1981 through 1988. He repeated previous presidential calls to “set aside” this special day as one of thanksgiving and prayer to God. Further, he challenged the nation to recall and fulfill their responsibility to “give” to those who are less fortunate. There are those who lacked of the “abundance” which America enjoyed — they do not enjoy the abundance which comes as a result of our industry. Many around the world do not enjoy an “abundance of freedom.” America’s example of freedom is one of the lasting legacies we leave for a world — we are the last best hope of mankind. Reagan reminded us to live up to that legacy. Continue reading


O’Reilly’s “Killing Reagan”: Fiction, Posing as Biography

by Ed Meese & John Heubusch     •     RealClearPolitics

There are over a thousand books on the subject of Ronald Reagan and his presidency. This is not surprising given that our 40th president is routinely cited in Gallup polls alongside George Washington, Abraham Lincoln, and Franklin Roosevelt as one of America’s most admired presidents.

Some books such as Lou Cannon’s “President Reagan: The Role of a Lifetime,” or Martin and Annelise Anderson and Kiron Skinner’s “Reagan in His Own Hand,” and most recently, “Last Act” by Craig Shirley offer keen insight into the man and benefit those seeking an accurate picture of the Reagan years. Unfortunately, Bill O’Reilly and Martin Dugard’s latest offering, “Killing Reagan,” is not among them.

We have watched numerous television interviews of Mr. O’Reilly since the release of “Killing Reagan” to assess the reasons he wrote the book. O’Reilly calls himself an “investigative historian” and claims such an approach “offers something new.” But there is “new” and there is “accurate”—and it’s unwise to confuse the two. O’Reilly says what he’s discovered is that for some of the time Reagan was in office, he was incapacitated to the point that it was questionable whether he could capably serve in the role of president of the United States. Continue reading


A Man Without Peer

Martin Anderson, a key adviser to Ronald Reagan, leaves behind a lasting legacy.

By Peter Roff     •     U.S. News

reaganfarewellAs an economist and political scientist, Martin Anderson was a man without peer. A senior fellow at Stanford University’s Hoover Institution since 1971, he did much to advance the cause of freedom as expressed in his love of big ideas.

Many credit the case he made against mandatory conscription inside the White House as a special assistant to former President Richard Nixon as an invaluable, perhaps even decisive contribution to the campaign to end the draft, which Nixon did in 1973 as the war in Vietnam was winding down.

In the late 1970s and early 1980s, Anderson was a key adviser to Ronald Reagan, helping him formulate a successful economic policy that permitted the liberation of American capital through tax cuts that, when combined with declining interest rates and a stable monetary policy, triggered an economic boom that led the world out of a long recession and laid the groundwork for the West’s ultimate victory in the Cold War. Continue reading


Reagan’s Christmas Messages

“In this day, when our freedom to worship is most precious, let us redouble our efforts to bring this and other greatest freedoms to all the peoples of the Earth.” (1988)

C26233-24

by Scott L. Vanatter

Ronald Reagan believed in Americans. He believed in the promise of America, that Americans possessed the inherent and acquired power to rise to the occasion. This, because of the overt and unique design of the Founders to foster freedom and responsibility. Reagan was optimistic about America’s future. He believed that when freedom flourishes, responsibility and accomplishment would naturally follow. (Sometimes to the astonishment and even delight of our greatest skeptics.) Others assume the opposite; they believe that force or coercion is necessary to accomplish their ends.

Reagan also believed in the spirit of Christmas. This unique season — filled with wonder, lights, music and children’s faces and hearts — lifts our hearts and fosters the better angels of our nature. He believed in its symbolic power to help us see and reach into the core of what it means to be an American. Both for believers and non-believers in the Babe born in Bethlehem. Continue reading


JFK, Reagan leadership helped bring down Berlin Wall

reagan jfk kennedyby Rick Hampson    •    USAToday

Ich bin ein Berliner,” John F. Kennedy proclaimed in 1963. Of communism’s defenders, he roared, “Let them come to Berlin!”

Standing at the communist barrier dividing the same city 24 years later, Ronald Reagan cried, “Mr. Gorbachev, tear down this wall!”

The 25th anniversary of the fall of the Berlin Wall on Nov. 9 raises a nostalgic question: Whatever happened to the kind of inspirational presidential oratory that helped bring down that wall — and Soviet communism?

In the history of the American presidency, such triumphs are few and fragile. Even those great Berlin lines might not have been delivered.

Kennedy’s famous words were not in the final draft of his prepared text. The signature line in Reagan’s speech was strenuously resisted by senior advisers., and it didn’t make a big impression at the time.

Today, when President Obama’s rhetoric seems unable to stop aggression in Eastern Europe and the Middle East, the two Berlin speeches demonstrate the power of words to influence world affairs, as well as their limits. Continue reading


Rep. Cathy McMorris-Rodgers, Actor Gary Sinise Honored at Frontiers of Freedom Annual Reagan Gala

Sinise Headshot CroppedWashington, DC — Frontiers of Freedom, a public advocacy group founded by the late Sen. Malcolm Wallop, R-Wy., announced Thursday it had presented in 2014 Ronald Reagan Award to actor Gary Sinise in recognition of his efforts to keep Reaganite values alive in Hollywood and for his work in support of wounded warriors and active duty servicemen and women.

“Gary Sinise is a true American patriot. His unselfish devotion to the cause of liberty, which is best expressed by his ongoing commitment to the health, morale, and well-being of America’s fighting men and women, makes him exceptionally worthy of the Reagan Award. The example Gary sets is one that other members of the film and entertainment community should seriously consider following,” George Landrith, president of Frontiers of Freedom said. Continue reading


The Tale of Two Recoveries


by Michael Hausam

How often have you heard a Democrat prattle on and on about how well Barack Obama has done with the economy, given the mess he inherited? Usually, it’s some version of, “Things are getting better, but the economy the President started with was so awful, so he’s done as well as anyone could expect.”

When Ronald Reagan took over from Jimmy Carter in ’81, things were actually worse economically compared to when Obama took over from George W. Bush in ’08. Continue reading


The Emerging Law of the Gun

Reagan Korea

by Peter Huessy

Russian President Vladimir Putin annexes the Crimea in gross violation of international law. What should America do, if anything?

There are many different ideas. Some suggest doing nothing. Some assert we cannot do anything. Others feel the consequences of letting such aggression stand will be serious.

The country’s divisions are certainly reflective of how divided on this Americans are.

What then is the proper role for America in the world that both keeps us safe and enhances our prosperity? Continue reading


Ronald Reagan’s Christmas Messages

“In this day, when our freedom to worship is most precious, let us redouble our efforts to bring this and other greatest freedoms to all the peoples of the Earth.” (1988)

C26233-24

by Scott L. Vanatter

Ronald Reagan believed in Americans. He believed in the promise of America, that Americans possessed the inherent and acquired power to rise to the occasion. This, because of the overt and unique design of the Founders to foster freedom and responsibility. Reagan was optimistic about America’s future. He believed that when freedom flourishes, responsibility and accomplishment would naturally follow. (Sometimes to the astonishment and even delight of our greatest skeptics.) Others assume the opposite; they believe that force or coercion is necessary to accomplish their ends. Continue reading


The Poor: Reagan vs. Obama

reaganfarewellby Ralph R. Reiland

I think the poor need another Reagan in the White House.

The income of black heads-of-households dropped by 10.9 percent from June 2009 to June 2013. This decline in black income is more than double the overall 4.4 percent drop nationally in real, adjusted for inflation, median household income during the same four years of alleged “recovery.”

Similarly, real incomes of those under age 25 fell by 9.6 percent over the same period — again, more than double the average drop in household income. Continue reading


Ronald Reagan, “You’re out there on the frontier of freedom.”

Ronald Reagan said to conservatives, “You’re the troops. You’re out there on the frontier of freedom.” 

Reagan Korea

A young soldier stands guard in the cold, looking out over no-man’s-land through to the other side of the demilitarized zone and into North Korea. President Reagan is visiting the troops there that day. During the visit the young soldier turns to the president, salutes and says, “Mr. President, when you get home, tell them we’re on the frontier of freedom.”

Reagan concludes his final speech to the Conservative Political Action Conference with this brief story. He compares the gathered conservative movers and shakers to the “troops” who — like the soldier in the story — are on the forefront of defeating “totalitarianism.”

He tells the story to them, “because,” he said, “you’re the troops.” He illustrates the comparison, telling them, “You’re out there on the frontier of freedom.” He then repeats what the soldier said to him (“Mr. President, we’re on the frontier of freedom.”) And immediately afterwards adds the pithy coda to the very end of the speech, “Well, so are you.”

And so we are. Or should be. Continue reading