4 ms·

Eliminating state and local taxes was a long time coming. Why should the no-tax states subsidize the bloated bureaucracy of CA/NY? It would be quite amazing i

by ixacto 9y ago

Eliminating state and local taxes was a long time coming. Why should the no-tax states subsidize the bloated bureaucracy of CA/NY? It would be quite amazing if CA got rid of state income taxes though.

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pkaye 9y ago
If anything, CA/NY subsidize many of the other states.
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jdavis703 9y ago
This tends to be a widely held misconception. It turns out that CA and NY pay more in federal taxes than they receive back in federal funds. It turns out that it's mostly the low tax states that take in more from the federal government than they pay. Here's one chart: https://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/ https://www.theatlantic.com/business/archive/2014/05/which-s...
- usaar333 9y ago
  Well, sure - but CA and NY also have very high income levels: https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per... We have a progressive tax system, so rich states should be paying more than they receive in federal funds. The more relevant question is how do the Atlantic's charts look once you correct for income levels? Given that CA's returns are barely less than 1, I suspect that CA is in a situation where the tax deduction is effectively allowing the federal government to subsidize the state.
  - jdavis703 9y ago
    Sure, but we're supposed to be creating a tax cut, not a tax hike. If you want to raise taxes to either reduce the deficit or create new government services that's fine by me. But instead this tax cut will go to cutting the taxes of the wealthy and increase the budget deficit. This will be paid for by states like NY and CA and won't help the tax system become more progressive.
- ixacto 9y ago
  I'm thinking about it in deducting state and local tax return. I pay $10000 in income tax. Some one in CA pays $10000 - $10000 deduction = $0 goes to the federal government if I am not mistaken. This is what I am talking about not the total contribution from each state. If you are tired of paying state tax WA/TX/FL all have large liberal cities that have a good amount of STEM jobs...
  - gamblor956 9y ago
    That's not how income taxes work. If $10000 is your tax liability, then a $10000 deduction is worth only your marginal rate * amount of the deduction, because a deduction reduces your taxable income prior to figuring out liability. (A tax credit is a dollar for dollar reduction of a tax liability.) Assuming 25% bracket, then a $10000 deduction for SALT is worth $2500 off your federal taxes.
majormajor 9y ago
You forget about states like Texas, which have lots of people taking substantial property tax deductions. This is a "soak everybody not wealthy enough to make substantial donations to us" plan, basically.
aisengard 9y ago
Because the "bloated bureaucracy" is providing vital services to its citizenry, boosting the state's economy and underlying workforce, and therefore boosting the taxes they ultimately pay, hence the fact of NY/CA taxpayers paying far more into federal government than they take out. Look no further than Kansas to see what happens to a state when you cut all local taxes, now its citizens are even more reliant on the federal government.

by ixacto 9y ago

deleted 9y ago

[deleted]

pkaye 9y ago

If anything, CA/NY subsidize many of the other states.

deleted 9y ago

[deleted]

jdavis703 9y ago

This tends to be a widely held misconception. It turns out that CA and NY pay more in federal taxes than they receive back in federal funds. It turns out that it's mostly the low tax states that take in more from the federal government than they pay. Here's one chart: https://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/ https://www.theatlantic.com/business/archive/2014/05/which-s...

usaar333 9y ago
Well, sure - but CA and NY also have very high income levels: https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per... We have a progressive tax system, so rich states should be paying more than they receive in federal funds. The more relevant question is how do the Atlantic's charts look once you correct for income levels? Given that CA's returns are barely less than 1, I suspect that CA is in a situation where the tax deduction is effectively allowing the federal government to subsidize the state.
- jdavis703 9y ago
  Sure, but we're supposed to be creating a tax cut, not a tax hike. If you want to raise taxes to either reduce the deficit or create new government services that's fine by me. But instead this tax cut will go to cutting the taxes of the wealthy and increase the budget deficit. This will be paid for by states like NY and CA and won't help the tax system become more progressive.
ixacto 9y ago
I'm thinking about it in deducting state and local tax return. I pay $10000 in income tax. Some one in CA pays $10000 - $10000 deduction = $0 goes to the federal government if I am not mistaken. This is what I am talking about not the total contribution from each state. If you are tired of paying state tax WA/TX/FL all have large liberal cities that have a good amount of STEM jobs...
- gamblor956 9y ago
  That's not how income taxes work. If $10000 is your tax liability, then a $10000 deduction is worth only your marginal rate * amount of the deduction, because a deduction reduces your taxable income prior to figuring out liability. (A tax credit is a dollar for dollar reduction of a tax liability.) Assuming 25% bracket, then a $10000 deduction for SALT is worth $2500 off your federal taxes.

majormajor 9y ago

You forget about states like Texas, which have lots of people taking substantial property tax deductions. This is a "soak everybody not wealthy enough to make substantial donations to us" plan, basically.

aisengard 9y ago

Because the "bloated bureaucracy" is providing vital services to its citizenry, boosting the state's economy and underlying workforce, and therefore boosting the taxes they ultimately pay, hence the fact of NY/CA taxpayers paying far more into federal government than they take out. Look no further than Kansas to see what happens to a state when you cut all local taxes, now its citizens are even more reliant on the federal government.