SALT Cap Directly Responsible for GOP House Loss in 2018

Originally sent to VIXCONTANGO subscribers on November 14th, 2018

The Tax Cuts and Jobs Act (TCJA) is directly responsible for the GOP loss of the House. I did an analysis last night of all the House districts that switched parties in 2018 mid-term election and discovered that nearly 60% of the districts (18 of 31) that turned from Red to Blue are High SALT districts. In yellow below, I have highlighted districts in New Jersey, New York, Washington, Virginia, California and Florida which turned. While Florida is not a high SALT state, the 2 districts on this list are Miami which has very high property values and thus property taxes. I have looked into housing in Florida – property taxes there are higher than Connecticut. Yes, there is no sales tax, but property taxes are very high. Believe it or not, Miami has had a Republican Congresswoman since forever but this year she lost to a Democrat. Why? Well, when the party in power raises your taxes by removing a critical deduction, what do you think will happen? Particularly if the other party is campaigning on restoring the deduction.

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The GOP in their infinite “wisdom” is claiming that Trump lost them the election. So the same people who voted for Trump in 2016 now voted against him in 2018? Well, first of all, Trump was NOT on the ballot. GOP congressmen were on the ballot. The only major policy difference between 2016 and 2018 elections was the Tax Cuts and Jobs Act and a few military spending and omnibus bills. There were no major changes made to Obamacare or to immigration policy or to anything else. In 2016, GOP campaigned on repealing and replacing Obamacare, on closing the Budget Deficits and on cutting Government Spending.

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Instead, from 2016 to 2018, the GOP did NOT repeal Obamacare, the Budget Deficit increased by $100 billion, Government Revenues (receipts) stayed flat and Government Spending (outlays) increased by $100 billion. I don’t think there is a single GOP voter out there who voted for this combination of increased government spending and higher deficits. They might as well have voted for Democrats. While it is easy to point the finger at Trump, it was Paul Ryan and the GOP congressmen who wrote all these bills and presented them at Trump’s desk for signing. Those GOP congressmen and their bills were on the ballot in 2018. And their $100 billion tax hike on individuals (primarily by means of repealing the SALT deduction) cost them House. There is no other reason. One thing voters don’t expect is for Republicans to be raising their taxes. For many voters, if Republicans are raising taxes, might as well be politically correct and vote Democrat.

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