Trump’s Policies Deal a Double Blow to Tax-Cutting States

It might be reasonable for the president to care about the successful efforts of many states to reform their taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. codes to promote job creation, investment, and overall economic growth.

President Trump ruffled feathers when, briefly souring on raising the state and local tax (SALT) deduction cap, he grumbled, “We don’t want to benefit Democrat governors.” But actions speak louder than words, and the president’s actual policies on tariffs and the SALT cap threaten to deliver a one-two punch to (mostly Republican) tax-cutting states.

Twenty-seven of the 31 states that voted for Mr. Trump in 2024 have lower individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rates now than when he began his first term or levy no income tax at all. Through recently enacted tax triggers, the count should soon hit 28. These states have prioritized tax competitiveness in pursuit of economic and population growth, and it’s working. In many states, sustained growth is fueling further tax relief in a virtuous cycle, while high-tax states are shedding workers and businesses, and then doubling down on high taxes to keep budgets balanced.

But now, the president’s policies would throw high-tax states a life raft as they swim against the tide—before potentially hitting all states with a tariffTariffs are taxes imposed by one country on goods imported from another country. Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters. -induced economic tsunami that could force lawmakers’ hands and reverse recent tax relief.