The Tax Cuts and Jobs Act combined a number of conservative initiatives into a package giving 82 percent of middle-class earners a break. This tax reform had a positive effect on families and economic growth, but it also created an unintended consequence that just may harm Republicans down the road. It is possible that there would be a major exodus of voters from blue states to red states. These demographic shifts may have significant political impacts on some of the most critical swing states and it could make it more challenging for Republicans to win future elections on both the state and federal levels.
The tax bill basically closed a major loophole for wealthy residents in blue states with the state and local tax deduction. By capping it at $10,000, Republicans ended a big subsidy to residents burdened by high taxes in states such as New York, New Jersey, California and Illinois. This gives these residents a strong incentive to pack up and relocate to the low tax states.
In New York City, residents pay about 12.7 percent of their income in state and local taxes. For middle- and high-income earners, the law drove their taxes up even more since they can no longer deduct such steep taxes. One in every 25 New Yorkers is a millionaire, and they each now owe Uncle Sam $21,000 more than they did before the law went into effect. A number of New Yorkers have already fled south to low-tax states such as Texas and Florida, both of which have no personal income tax. The exodus is significant enough that Governor Andrew Cuomo (D) said earlier this year that the state had faced an unexpected $2.3 billion budget shortfall.
California is also hemorrhaging middle- and high-income earners to low-tax states, and Texas by far is their top destination. It is no coincidence that the fastest-growing states are low-tax red or purple states that are attracting economic refugees from blue states. On the one hand, these trends are vindication for Republicans, as people flock to conservative states with responsible fiscal policy and low taxes. On the other hand, these shifts could raise difficulties for Republicans in electoral politics.
As the strong economic growth lifts already growing red states, migration will continue to transform the demographics and political calculus across the country. Ultimately, Trump could be remembered for ushering in this era of prosperity along with inadvertently pushing waves of voters from blue states to red states. This could affect the president’s legacy.