Camp's House GOP tax plan hits blue staters hard

For three straight years, 95 percent of Republicans in Congress voted for the Paul Ryan budget and its overhaul of the tax code to just two rates of 10 and 25 percent. But while Ryan refused to identify a single tax break he would end in order to make those lower rates possible, on Wednesday House Ways and Means Committee Chairman Dave Camp (R-MI) did. As it turns out, two of the tax expenditures Camp is targeting—ending the state and local tax deduction and reducing the mortgage interest deduction—will disproportionately hit blue state residents.

As Bloomberg News reported, "A tax plan from House Ways and Means Committee Chairman Dave Camp would further limit the mortgage- interest break and end the deduction for state and local taxes, according to a nonpartisan congressional summary."

The mortgage proposal would reduce the amount of mortgage debt eligible for the interest deduction to $500,000 from $1 million, according to the document. The state and local tax break, which particularly benefits residents of high-tax states such as New York and New Jersey, would be eliminated.

To put it another way, Camp's proposal like other Republican efforts targets the more affluent, higher cost and more highly taxed states where Democrats generally hold sway.

As the nation approached the so-called "fiscal cliff" in November 2012, the Wall Street Journal explained the dynamic behind what conservatives like to call the "blue state tax break."

Limiting personal income-tax deductions and other federal tax breaks, an idea gaining momentum as part of a fix for America's budget crisis, would hit some parts of the country harder than others, with a series of high-income blue states leading the way...

After California, the highest average itemized deductions--all over $28,000--were claimed by taxpayers in New York, the District of Columbia, Connecticut, New Jersey, Maryland and Massachusetts. All have high state, local and property taxes, which may be deducted from income on federal returns, although other tax provisions already limit some deductions.

As the WSJ's interactive table shows, of the 10 states with the highest percentage of taxpayers itemizing deductions, 9 voted for Barack Obama for president.

More analysis below the fold.