“It’s a Ponzi Scheme”: Wall Street Fears Trump’s Deranged Tax Plan Could Kick Off Economic Euthanasia

Trump loves going after his adversaries.

It’s a great question. And the House plan provides plenty to be worried about in that regard. Take, for instance, the proposed elimination of the deductibility of state and local taxes. That is obviously a cynical, politically motivated ploy on Donald Trump’s part to penalize voters who didn’t vote for him (for good reason) in high-tax blue states, such as New York and California, and to give a benefit to the red-state voters who did vote for him. (I get it, elections have consequences.) Eliminating the deductibility of state and local taxes is an incredibly divisive plan. “It’s a transfer to red-state wealthy guys,” said the executive, who lives in a blue state.

Worse, he says, it could lead to another housing crisis, just as the last one is (or should be) still be fresh in our collective memories. Here’s his thinking (which is hard to refute): Since, generally speaking, one of the largest state taxes is on property—your home—eliminating the federal tax deduction for state property taxes will inevitably cause the cost of homeownership in states with high property taxes to go up. It follows, logically, that if the annual cost of home ownership goes up, then the value of the home—which is for most people is their single most-valuable asset—must go down. The National Association of Realtors commissioned a recent study that predicted that the elimination of the deduction for state and local taxes could result in a decrease in home valuations of between 10 percent and 17 percent.
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