Suburban Delaware County, which includes part of Philadelphia's wealthy Main Line suburbs, plus Northampton County in the Lehigh Valley and 16 of the 21 counties in New Jersey, are among 117 U.S. counties that are most "at risk" from financial pressure and high-income taxpayer rebellion — or flight — due to changes in U.S. tax policy, S&P Global Ratings tells clients in a new report today.

The Tax Cuts and Jobs Act, passed by the elected Republican majorities in Congress and signed by President Trump, reduced federal tax rates, but also reduced tax deductions for people who pay a lot of state and local taxes.

S&P, which rates debt for borrowers based on how likely analysts think they are to pay money back to investors and bondholders, reviewed IRS tax return data and the U.S. Census community survey to identify counties that were among the top 10 percent of U.S. counties for the proportion of (mostly wealthy) taxpayers who itemized their federal tax benefits; where peoples' state and local tax deductions tended to be more than $10,000 a year, the new limit for the federal tax deduction; and where state and local tax rates are highest.

The hardest-hit areas include many of the nation's wealthiest and most Democratic-leaning areas, including New York's Manhattan, Staten and Long Islands, the lower Hudson Valley, most of Connecticut and New Jersey (including Philly's South Jersey suburbs and Atlantic County, but not Cape May or Cumberland counties), Washington's Maryland suburbs, the Chicago, Minneapolis, Portland (Ore.), San Francisco and Silicon Valley areas, and most of Southern California outside Los Angeles, according to the report by S&P analysts Jane H. Ridley and Christopher Grant.

By effectively increasing the state and local tax burden in those counties, "the tax act may dampen incentives to buy higher-priced homes, or at least decrease demand for houses where the combination of state and local taxes paid by a taxpayer" is more than $10,000 a year, S&P writes. "This could eventually limit home price growth and lead to more tax appeals," leading to a drop in these state and local governments' tax collections.

S&P also predicted tax reactions in some high-tax areas where the rich no longer qualify for big breaks: "Constituents who feel squeezed under the new tax regime may not be interested in supporting a tax-rate increase, especially if they can no longer deduct it from their federal taxable income."

The report added this will apply especially to high-income taxpayers, who in liberal areas often pay higher tax rates than middle-income or working-class wage-earners: "These effects could be most significant for governments that have a highly progressive tax structure due to their reliance on a relatively small number of taxpayers."

Former New Jersey Gov. Chris Christie used to complain that his state taxed its richest citizens so much that it risked driving them out of state. Pennsylvania has a flat personal income tax and many exceptions in its business income tax, but local tax rates vary considerably, with suburban Philadelphia districts levying high and increasing property taxes.

Tax reform will also benefit states and counties with lower tax rates and lower taxes on rich people by making them still more attractive, compared with high-tax areas, S&P added. These "low-tax jurisdictions could conceivably see increased demand for housing and faster revenue growth."

S&P identified more than 700 counties likely to benefit, by comparison, many of them rural. These are concentrated in predominantly Republican states such as Alabama, Arizona, Louisiana, Missouri, Oklahoma, Tennessee, Wyoming, and parts of Florida and Texas, but there are also beneficiaries in Democratic-leaning states, including most of Colorado, Nevada, New Mexico, and Washington.

If the new tax arrangements lead to more "corporate relocations away from higher-tax areas — such as the recent Alliance Bernstein announcement that [the New York-based investment company's] headquarters will move to Nashville," S&P could end up cutting high-tax area's credit ratings, and boosting those of "receiving regions" such as Nashville, the report concludes.