A handful of House Republicans demand that the state and local tax (SALT) deduction be expanded because their states’ tax burdens are high. The deduction was capped in the Tax Cuts and Jobs Act of 2017 at $10,000 per year. The House reconciliation bill this year would raise that to $40,000. The Senate should scale it back, keep it at $10,000, or ideally, repeal it entirely.

David Ditch explains why in a new article for the Economic Policy Innovation Center. He uses New York as the example of how the SALT deduction enables state governments to overspend by partially shielding residents from the full burden of taxation. Since several of the SALT deduction champions in the House are from New York, the example is apt.

It’s truly astonishing how fiscally irresponsible New York is. The state budget proposal calls for $254 billion in spending, which is 8.3 percent higher than last year. That comes despite New York’s population having peaked in 2020. It’s a spending increase far in excess of the rate of inflation to provide government services for fewer people.

Ditch compares the New York state budget to the Florida state budget, a sensible comparison since both are big states with major urban and rural areas and high levels of demographic and economic diversity. He finds:

• New York’s spending per capita was 30 percent higher than Florida’s in 2000. It was 133 percent higher last year.
• New York’s Medicaid spending per capita was 112 percent higher than Florida’s in 2000. It was 208 percent higher last year. Florida has not expanded Medicaid under Obamacare, while New York has expanded it more aggressively than any other state. “For perspective, in 2024 New York spent nearly as much per capita on Medicaid ($4,551) as Florida did for its entire state budget ($5,076).”
• New York’s education spending per student is highest in the country, at about $35,000. Florida spends about $13,000 per student. Florida fourth-graders rank third in the country in reading and fourth in math. New York fourth-graders rank 36th and 46th.
• Florida has surpassed New York in population and continues to boom. “From 2000 to 2024, New York’s population grew 4.5%, while Florida’s grew 45.6% — a tenfold difference.”

Florida representatives aren’t complaining about the SALT deduction because their constituents don’t need it and their state government is getting better results. New York is spending its revenue on things such as providing medical coverage to illegal immigrants, bankrolling the Service Employees International Union with at-home health employment, and providing teachers with exorbitant fringe benefits for producing worse students.

If New Yorkers want to govern themselves that way, that’s fine. But federalism goes both ways: They need to be the ones to pay for their gigantic government, and they don’t deserve a write-off on their federal taxes for it. And federal-level Republicans should be especially unwilling to give them one.