Murdoch paper calls out discrimination against billionaires in small towns

WSJ's editorialists, who never saw a tax cut for the wealthy they didn't like, now argues that if you're rich and live in a city that costs a lot and voted (D) you deserve a penalty:

So welcome to the brave new world of “tax equity.” If you live in a state that voted for Barack Obama, you get a tax cut. 

 That’s a great line.    And, overall, the editorialists have a point.   You can’t simultaneously argue that those who earn over $100,000 are “rich” and argue that it depends on where you live.    And there’s no doubt that the policies pursued in blue states and major urban centers contribute to the high cost of living. 


On the other hand, Nadler is of course right that it’s more expensive to live in Manhattan than in Topeka. And it’s not just because of high taxes and regulation but because of the laws of supply and demand.   A lot of people want to live in Manhattan, close to its jobs, restaurants, culture, nightlife, and whatnot, and it’s very small.  So, a 600 square foot loft goes for more than a three bedroom house out in the middle of nowhere. 


Should government policy reflect this fact?   It already does.  For example, federal employees living in high cost of living areas get paid a substantial bonus to offset these costs.   And, as noted in the editorial, they also get the tax write-offs for certain things that are subsidized in our system.  


Furthermore, the fact of the matter is that, generally speaking, the blue states and the big cities subsidize the red states and the rural areas, not vice versa.  It’s been that way for as long as I can remember.  


If we’re going to have an income tax — and we are — and it’s going to be graduated by income — and it is — then it probably makes some sense to include some sort of regional adjustment.  (Full disclosure: I’d personally benefit from doing this, living as I do in the DC suburbs.)   


Realistically, though, it’s not going to happen.   


First, the plight of high earners living in expensive cities does not tug at the hearts and souls of most Americans. You’d just never get anything like this through the House, much less the Senate.  


Second, high earners living in expensive cities is an almost perfect overlap with high earners.  Aside from the odd Warren Buffett and Sam Walton, the money congregates around big cities.  Indeed, it’s almost definitionally true since low earners can’t afford to live there.

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