The new tax legislation is being trumpeted (no pun intended) as the new era of tax reform. I am afraid that I beg to differ. It is, yet again, another piece of legislation that is being put together with bubble gum and band aids, not dissimilar to the passage of Obama Care, another reform that went awry.
My major problem with the legislation is that it is being drawn along political lines, in other words, along the lines of the red and blue states. The most notable provision will be the elimination of state and local tax deductions, a change that punishes, most notably, New York and California, decidedly blue states. With this change, two of the most important U.S. economies will be exposed to the exodus of high income taxpayers, in other words, top executives, who will flee to low-to-no tax jurisdictions, while still negatively impacting the middle class taxpayer whose taxes will increase without the deductions.
From a recruitment point of view, this change will make it even harder than it already is to attract talent to these and other states that have higher income taxes. The negative and seriously damaging influence of just this change in the “reform” will take years to detect, but when the legislators realize what they have done, it will be too late, as employers will already be black and blue.