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We should remove the California and New York subsidy: We subsidize their social services at the expense of the nation by allowing them to deduct local taxes fr

We should remove the California and New York subsidy: We subsidize their social services at the expense of the nation by allowing them to deduct local taxes from national taxes -- lowering their effective national tax rate as a reward for giving their residents back tax money via services. I'm for tax equity: stop subsidizing the wealthy states for hoarding their money.

mc32 8y ago
California usually complains its taxed pop sends more money in than it receives in federal largesse. That we are subsidizing “red states”. Not sure who’s right since both make these claims against each other.
- scarmig 8y ago
  Both. California and NY both are productive enough that they send far more money to the federal government than they get back. The state and local tax deduction makes up for this a little, but on net they still give far more than red states.
  - deleted 8y ago
    [deleted]
- NotAnEconomist 8y ago
  > California usually complains its taxed pop sends more money in than it receives in federal largesse. This isn't incompatible with what I said. California pays more than it receives, but less than it should given the benefits that it receives (and the agreed upon national tax rate). It's good that SALT has been limited, and the investment that the US has made in certain urban environments (eg, founding Silicon Valley) will be properly distributed across the country instead of hoarded by the states where those investments were made.
  - 0xffff2 8y ago
    >California pays more than it receives, but less than it should given the benefits that it receives How are you measuring benefits received if not by dollars received?
    - eropple 8y ago
      There is a multiplier effect to money received, for sure. But that fits into an observation that a friend of mine once made: it's a lot easier to get things done in a place where things already work (mostly) correctly. Which, incidentally, is why I'm pretty happy with my state being a net payer. I want things to be better for everybody. But a little gratitude would be nice.
- jjeaff 8y ago
  Well, the wealthy are also "subsidizing" the poor in America by paying more in taxes. Should we try to stop that as well?
  - 0xffff2 8y ago
    I don't think anyone is suggesting that we should try to stop this in either case. There's a balance to be found in both cases, and it's the correct balance point that is being discussed.
ceejayoz 8y ago
https://www.apnews.com/2f83c72de1bd440d92cdbc0d3b6bc08c https://www.apnews.com/2f83c72de1bd440d92cdbc0d3b6bc08c > An Associated Press Fact Check finds it’s actually the other way around. High-tax, traditionally Democratic states (blue), subsidize low-tax, traditionally Republican states (red) — in a big way. > Mississippi received $2.13 for every tax dollar the state sent to Washington in 2015, according to the Rockefeller study. West Virginia received $2.07, Kentucky got $1.90 and South Carolina got $1.71. > Meanwhile, New Jersey received 74 cents in federal spending for tax every dollar the state sent to Washington. New York received 81 cents, Connecticut received 82 cents and Massachusetts received 83 cents. California fared a bit better than other blue states. It received 96 cents for every dollar the state sent to Washington.
ip26 8y ago
by allowing them to deduct local taxes from national taxes That has already been addressed, to some extent. The most recent tax bill capped the deduction to $10k.
ryanwaggoner 8y ago
Disagree with your characterization but regardless, the tax reform passed in 2017 did most of this, capping state income and property tax deductions to $10k and also raising the standard deduction significantly, so most families won’t be itemizing anymore and can’t even take the $10k deduction.
eropple 8y ago
"We"--and, err, California and New York are still amongst the highest federal payers, as is Massachusetts where I live--subsidize our social services and community investments because they actually have them to counterbalance the federal government's general indifference towards the ideas thereof (unless you're old and thus a reliable voter). "You" can, too, do the same. Or we, rather than "we", can do it at a federal level. Economies of scale exist, of course, and there's an efficiency argument to doing it (which is generally thwarted by spittle-flecking about federalism and states' rights, which, fine, but you don't get to have it both ways!). To a nontrivial degree this already happens; low-tax states generally rely on the particularly-bad implementations of many programs, including social safety nets, provided by the federal government. This is one reason why, to use the terms of art often favored by...certain populations, the taker states are low-tax and generally hew center-right to right-wing in policy, while the maker states are often more high-tax and generally more center-left in policy: because they will be backstopped by the systems that exists federally even as they campaign to gut it in their "little laboratory" of a state. There exist approaches that don't penalize places that actually act as a more-or-less civic society for spending money to make that happen. Assuming one actually wants civic society to exist. Which I do. But I recognize that there are rather large forces in America who are upset by the idea.
- NotAnEconomist 8y ago
  > Assuming one actually wants civic society to exist. Which I do. That's clearly not true: you're making ad hominems at people who disagree on tax policy. Which is common of the entitled people from those states: receive massive subsidies which pay off, and then refuse to return that wealth to the rest of the nation at an equitable tax rate, pretending you're some virtuous self-starters who through your benevolent policies created all that wealth -- hoarding it for special privileges for yourselves, while harping about how others should pick themselves up by their bootstraps. Perhaps if California and New York stopped hoarding the benefits of federal investments, the federal government could afford to make large Silicon-Valley-starting style investments in other regions of the country, and help them recover. The entitlement to think you deserve to buy yourself nice things with the ROI on federal money, rather than having to pay back so the federal government can help other regions is staggering. No wonder people from California and New York talk about "equitable" so often: their entire society is designed around their inherent entitlement from the rest of the country, and it's a Freudian admission that needs to end.
pwthornton 8y ago
You have this backwards. California and New York subsidize the nation (along with other productive, higher tax states), not the other way around. If you get rid of SALT entirely, which has always existed as part of the federal income tax, you incentivize states to stop spending their own money and relying on the federal government for everything. The idea to get rid of SALT might make sense if the federal government provided few services and had a small budget. Imagine if the federal government had a budget 1/10th of its current size. In that world, state and local governments would pick up the slack with their taxation and spending. Many smaller, so-called "low tax states" simply don't provide services to their residents, and instead rely on the federal government to subsidize them. Medicaid expansion, which many lower-tax/poorer/less healthy states have benefited greatly from is paid for by higher-tax/richer/more healthy states. It doesn't make sense for the federal government to further incentivize low productivity states to mooch off of more productive parts of the economy.
- dsfyu404ed 8y ago
  >You have this backwards. California and New York subsidize the nation (along with other productive, higher tax states), not the other way around. The overwhelming majority of federal money is spent on safety nets (SS, medicaid, etc) and military. Whether a state is a net contributor or recipient basically depends on ratio of rich people to poor people and how many military installations you have. Even transportation spending is a drop in the bucket compared to those and it's mostly based on area (kind of hard to fit hundreds of miles of interstate in RI). It's really not as cut and clear as many here would like it to be. Edit: Since apparently it is that cut and clear would anyone care to elaborate why?
- dahdum 8y ago
  Why shouldn't the richer states pay more in taxes than the poorer ones? Our entire income tax system is progressive. Are you proposing that poor states tax their citizens more when they already have less?
- Shivetya 8y ago
  The key factor you are leaving out is, California and New York, also have very large numbers of very wealthy people, who pay on average a much higher percentage of all taxes in this country. That California and New York charge their residents higher rates is immaterial to this. Hence the change is a soak the rich change would you would think that progressives would like. the same tax law changes included raising the standard deduction to twelve thousand thereby giving the poor, the middle class, and even portions of the upper middle class, a bigger write off. The only people negatively affected by the change are in income categories far in excess of the average American. The same people who many claim are not paying their fair share. Well here is the simple truth, the wealth needed to pay for all the programs politicians are wanted cannot be made off the backs of billionaires. There aren't enough of them. You could take all their money and barely pay a year of the government. However the wealth does exist in the upper income earners, those north of hundred thousand and more. Over twenty percent of America is beyond that income level and they are most likely to be affected. So, you have to ask yourself, who do we need to help? Who do we tax to pay for it?
rconti 8y ago
Never has a username been more apt than "NotAnEconomist" here.
moate 8y ago
"Lowering their effective national tax rate as a reward for giving their residents back tax money via services." So it's bad that these states are providing services for their residents in exchange for tax funds? I don't understand any of your points here. These states consume less federal aid (yay!) but have higher state taxes (boo!) but provide more services (yay!) but those services "only" benefit locals (boo?). So they're paying less in taxes, because they're instead focused on taking care of their own. Is this just a really weird "Only Federalism" argument? I mean, I'm fine with this proposal if we stripe away all states and just act as a single unified country, where everyone has to play by the same rules but good luck getting Delaware and Mississippi agreeing to that one. I think you should really commit to your handle and just stay out of this whole argument. You don't seem to be making any kind of point other than "Rich states aren't doing enough to pull up poor states" which is a pretty hard sell. (edited for typo)
- eropple 8y ago
  You're very right in that the third rail here is federalism. Mostly that, at a certain scale and with certain kinds of heterogeneity, it stops working, and you start getting bizarre situations where the have-nots are not angry that they have not, but rather that the haves have. As one of those haves, I am very in-favor of spreading that around. The solution, however, is to not discourage the having, but to actually spread it around. That spread is not created by punitively punishing those who, as one of those "civic society" things, decide that it's a good idea to do things to help the people who live in it. I mean, let's be real for a sec (and I have a feeling you know this, I'm not trying to lecture, it's just a convenient jumping-off point): the only impact of the pseudopolicy proposed here is to damage states with the temerity to have a functioning economy and social safety net and to damage their implementations thereof, not to provide better implementations in places that currently lack. After all--the federal appetite for tax cuts and military spending seems to know few bounds. As such, framing it as either equity or equality for the poor, benighted Kansases of the world and their Sam Brownbacks rings more than a little hollow.
johnnyb9 8y ago
Meta point: does it seem like conservative posts on HN are constantly downvoted nowadays? Previously downvotes were saved for the topics that don’t contribute anything to the discussion.
- MockObject 8y ago
  It's just a sign of the times.
cptskippy 8y ago
Why have you framed this as though it's an exclusive benefit awarded exclusively to NY and CA? Everyone can deduct their state income tax from their federal obligation regardless of what state they live in. You might even argue that this is a states rights issue.

mc32 8y ago

California usually complains its taxed pop sends more money in than it receives in federal largesse. That we are subsidizing “red states”. Not sure who’s right since both make these claims against each other.

scarmig 8y ago
Both. California and NY both are productive enough that they send far more money to the federal government than they get back. The state and local tax deduction makes up for this a little, but on net they still give far more than red states.
- deleted 8y ago
  [deleted]
NotAnEconomist 8y ago
> California usually complains its taxed pop sends more money in than it receives in federal largesse. This isn't incompatible with what I said. California pays more than it receives, but less than it should given the benefits that it receives (and the agreed upon national tax rate). It's good that SALT has been limited, and the investment that the US has made in certain urban environments (eg, founding Silicon Valley) will be properly distributed across the country instead of hoarded by the states where those investments were made.
- 0xffff2 8y ago
  >California pays more than it receives, but less than it should given the benefits that it receives How are you measuring benefits received if not by dollars received?
  - eropple 8y ago
    There is a multiplier effect to money received, for sure. But that fits into an observation that a friend of mine once made: it's a lot easier to get things done in a place where things already work (mostly) correctly. Which, incidentally, is why I'm pretty happy with my state being a net payer. I want things to be better for everybody. But a little gratitude would be nice.
jjeaff 8y ago
Well, the wealthy are also "subsidizing" the poor in America by paying more in taxes. Should we try to stop that as well?
- 0xffff2 8y ago
  I don't think anyone is suggesting that we should try to stop this in either case. There's a balance to be found in both cases, and it's the correct balance point that is being discussed.

ceejayoz 8y ago

https://www.apnews.com/2f83c72de1bd440d92cdbc0d3b6bc08c https://www.apnews.com/2f83c72de1bd440d92cdbc0d3b6bc08c > An Associated Press Fact Check finds it’s actually the other way around. High-tax, traditionally Democratic states (blue), subsidize low-tax, traditionally Republican states (red) — in a big way. > Mississippi received $2.13 for every tax dollar the state sent to Washington in 2015, according to the Rockefeller study. West Virginia received $2.07, Kentucky got $1.90 and South Carolina got $1.71. > Meanwhile, New Jersey received 74 cents in federal spending for tax every dollar the state sent to Washington. New York received 81 cents, Connecticut received 82 cents and Massachusetts received 83 cents. California fared a bit better than other blue states. It received 96 cents for every dollar the state sent to Washington.

ip26 8y ago

by allowing them to deduct local taxes from national taxes That has already been addressed, to some extent. The most recent tax bill capped the deduction to $10k.

ryanwaggoner 8y ago

Disagree with your characterization but regardless, the tax reform passed in 2017 did most of this, capping state income and property tax deductions to $10k and also raising the standard deduction significantly, so most families won’t be itemizing anymore and can’t even take the $10k deduction.

eropple 8y ago

"We"--and, err, California and New York are still amongst the highest federal payers, as is Massachusetts where I live--subsidize our social services and community investments because they actually have them to counterbalance the federal government's general indifference towards the ideas thereof (unless you're old and thus a reliable voter). "You" can, too, do the same. Or we, rather than "we", can do it at a federal level. Economies of scale exist, of course, and there's an efficiency argument to doing it (which is generally thwarted by spittle-flecking about federalism and states' rights, which, fine, but you don't get to have it both ways!). To a nontrivial degree this already happens; low-tax states generally rely on the particularly-bad implementations of many programs, including social safety nets, provided by the federal government. This is one reason why, to use the terms of art often favored by...certain populations, the taker states are low-tax and generally hew center-right to right-wing in policy, while the maker states are often more high-tax and generally more center-left in policy: because they will be backstopped by the systems that exists federally even as they campaign to gut it in their "little laboratory" of a state. There exist approaches that don't penalize places that actually act as a more-or-less civic society for spending money to make that happen. Assuming one actually wants civic society to exist. Which I do. But I recognize that there are rather large forces in America who are upset by the idea.

NotAnEconomist 8y ago
> Assuming one actually wants civic society to exist. Which I do. That's clearly not true: you're making ad hominems at people who disagree on tax policy. Which is common of the entitled people from those states: receive massive subsidies which pay off, and then refuse to return that wealth to the rest of the nation at an equitable tax rate, pretending you're some virtuous self-starters who through your benevolent policies created all that wealth -- hoarding it for special privileges for yourselves, while harping about how others should pick themselves up by their bootstraps. Perhaps if California and New York stopped hoarding the benefits of federal investments, the federal government could afford to make large Silicon-Valley-starting style investments in other regions of the country, and help them recover. The entitlement to think you deserve to buy yourself nice things with the ROI on federal money, rather than having to pay back so the federal government can help other regions is staggering. No wonder people from California and New York talk about "equitable" so often: their entire society is designed around their inherent entitlement from the rest of the country, and it's a Freudian admission that needs to end.

pwthornton 8y ago

You have this backwards. California and New York subsidize the nation (along with other productive, higher tax states), not the other way around. If you get rid of SALT entirely, which has always existed as part of the federal income tax, you incentivize states to stop spending their own money and relying on the federal government for everything. The idea to get rid of SALT might make sense if the federal government provided few services and had a small budget. Imagine if the federal government had a budget 1/10th of its current size. In that world, state and local governments would pick up the slack with their taxation and spending. Many smaller, so-called "low tax states" simply don't provide services to their residents, and instead rely on the federal government to subsidize them. Medicaid expansion, which many lower-tax/poorer/less healthy states have benefited greatly from is paid for by higher-tax/richer/more healthy states. It doesn't make sense for the federal government to further incentivize low productivity states to mooch off of more productive parts of the economy.

dsfyu404ed 8y ago
>You have this backwards. California and New York subsidize the nation (along with other productive, higher tax states), not the other way around. The overwhelming majority of federal money is spent on safety nets (SS, medicaid, etc) and military. Whether a state is a net contributor or recipient basically depends on ratio of rich people to poor people and how many military installations you have. Even transportation spending is a drop in the bucket compared to those and it's mostly based on area (kind of hard to fit hundreds of miles of interstate in RI). It's really not as cut and clear as many here would like it to be. Edit: Since apparently it is that cut and clear would anyone care to elaborate why?
dahdum 8y ago
Why shouldn't the richer states pay more in taxes than the poorer ones? Our entire income tax system is progressive. Are you proposing that poor states tax their citizens more when they already have less?
Shivetya 8y ago
The key factor you are leaving out is, California and New York, also have very large numbers of very wealthy people, who pay on average a much higher percentage of all taxes in this country. That California and New York charge their residents higher rates is immaterial to this. Hence the change is a soak the rich change would you would think that progressives would like. the same tax law changes included raising the standard deduction to twelve thousand thereby giving the poor, the middle class, and even portions of the upper middle class, a bigger write off. The only people negatively affected by the change are in income categories far in excess of the average American. The same people who many claim are not paying their fair share. Well here is the simple truth, the wealth needed to pay for all the programs politicians are wanted cannot be made off the backs of billionaires. There aren't enough of them. You could take all their money and barely pay a year of the government. However the wealth does exist in the upper income earners, those north of hundred thousand and more. Over twenty percent of America is beyond that income level and they are most likely to be affected. So, you have to ask yourself, who do we need to help? Who do we tax to pay for it?

rconti 8y ago

Never has a username been more apt than "NotAnEconomist" here.

moate 8y ago

"Lowering their effective national tax rate as a reward for giving their residents back tax money via services." So it's bad that these states are providing services for their residents in exchange for tax funds? I don't understand any of your points here. These states consume less federal aid (yay!) but have higher state taxes (boo!) but provide more services (yay!) but those services "only" benefit locals (boo?). So they're paying less in taxes, because they're instead focused on taking care of their own. Is this just a really weird "Only Federalism" argument? I mean, I'm fine with this proposal if we stripe away all states and just act as a single unified country, where everyone has to play by the same rules but good luck getting Delaware and Mississippi agreeing to that one. I think you should really commit to your handle and just stay out of this whole argument. You don't seem to be making any kind of point other than "Rich states aren't doing enough to pull up poor states" which is a pretty hard sell. (edited for typo)

eropple 8y ago
You're very right in that the third rail here is federalism. Mostly that, at a certain scale and with certain kinds of heterogeneity, it stops working, and you start getting bizarre situations where the have-nots are not angry that they have not, but rather that the haves have. As one of those haves, I am very in-favor of spreading that around. The solution, however, is to not discourage the having, but to actually spread it around. That spread is not created by punitively punishing those who, as one of those "civic society" things, decide that it's a good idea to do things to help the people who live in it. I mean, let's be real for a sec (and I have a feeling you know this, I'm not trying to lecture, it's just a convenient jumping-off point): the only impact of the pseudopolicy proposed here is to damage states with the temerity to have a functioning economy and social safety net and to damage their implementations thereof, not to provide better implementations in places that currently lack. After all--the federal appetite for tax cuts and military spending seems to know few bounds. As such, framing it as either equity or equality for the poor, benighted Kansases of the world and their Sam Brownbacks rings more than a little hollow.

johnnyb9 8y ago

Meta point: does it seem like conservative posts on HN are constantly downvoted nowadays? Previously downvotes were saved for the topics that don’t contribute anything to the discussion.

MockObject 8y ago
It's just a sign of the times.

cptskippy 8y ago

Why have you framed this as though it's an exclusive benefit awarded exclusively to NY and CA? Everyone can deduct their state income tax from their federal obligation regardless of what state they live in. You might even argue that this is a states rights issue.