…if Republicans cut taxes — in particular, taxes on investment income — then the biggest winners are going to be the residents of Democratic states where incomes, and thus income taxes, are significantly higher. Governors and legislatures in those states — home to roughly half of all Americans — will now have the financial headroom to raise state income and business taxes by as much as the federal government cuts them — and use the additional revenue to replace all the federal services and benefits that Republicans have vowed to cut.
If these states want to maintain the Obamacare insurance exchanges, the low-income subsidies and the expansion of the Medicaid program, they can do that, just as Massachusetts did under Mitt Romney even before passage of the federal law. Their state insurance commissioners can also keep in place many of the Obamacare insurance regulations.
The additional state revenue could also be used to replace cuts in federal funding for public schools, or food stamps, or public transit subsidies. Given the existing imbalance between taxes paid and benefits received by most of these states, there should even be money left over to invest in public college and university systems that in recent years have suffered badly from a reduction in state support.
Here is the full column.