5 ms·

Where do the states get money to operate, if not taxes?

darawk 8y ago
I'm not saying states shouldn't levy taxes. I'm saying that state taxes shouldn't diminish federal taxes. Under the old system, if your home state charged say, a 10% income tax, that would reduce your federally taxable income by 10%. That means that states could essentially eat a chunk of the revenue that would otherwise have gone to the federal government.
- jrs235 8y ago
  What the Republicans should have done was get rid of the federal income tax, have all taxes apportioned, and leave it to the states to decide how they wish to collect the revenue needed to pay the federal government.
  - darawk 8y ago
    That's certainly an interesting proposal that seems reasonable to me. But I think we both know it's way too radical to be remotely politically feasible. I'd vote for it if I could though.
  - DevX101 8y ago
    Republicans would never do this. Republican states are net recipients of federal money. Wealthy democratic states are net givers of federal money. Poor states like Mississipi are funded in large part by the wealth democratic states that their politicians like to attack.
  - conanbatt 8y ago
    It might be a good idea to do it this way, but it is a very radical change with high chances of errors. What if 10 states enact some abhorrent legislation and makes them broke, or collect no taxes? I'd think this kind of change requires constitution ammendment level coordination.
    - dsfyu404ed 8y ago
      > have all taxes apportioned, and leave it to the states to decide how they wish to collect the revenue needed to pay the federal government. Let them crash and burn and serve as an example of the kind of policy you shouldn't enact. There's 50 states and interstate migration is not restricted. At a national level people do very much have the ability to pick one of the 49 other ships if the one they are on is sinking. Sure it would suck for the people who don't see the writing on the wall when their state is going down but I think it would be less damaging in the long term than the status quo.
      - conanbatt 8y ago
        Well you will need plenty of states to vote this change, and I think they would vote against it, even if on paper it gives them more economic power and independence.
  - jdhn 8y ago
    I would've liked to seen them completely eliminate the mortgage and property tax deduction. Those two aren't taxed at the local level, unlike income which is.
  - tomp 8y ago
    How much revenue would you levy from each state? What would be a fair way to decide that? The point of income taxes is, that we (the society) consider them fair - the high-income-earners don't only pay more taxes in absolute terms, but also in relative terms, because of progressive taxation (personally, I think that tax rates should be based on wealth, not income, and that capital gains should be taxed equally as income, but I'm clearly in the minority with that opinion).
    - jrs235 8y ago
      Population? Fair? That's a conversation. (Personally I think wealth should be taxed somehow too. What's fair? Another conversation. I too think capital gains should be taxed at the same rate or higher than income.)
- thaumasiotes 8y ago
  > Under the old system, if your home state charged say, a 10% income tax, that would reduce your federally taxable income by 10%. No, it would reduce federally taxable income by more than 10%, because an income tax will lower income levels in the state. Even after eliminating the deduction for local taxes, the state income tax is lowering federal tax receipts. States can always eat a chunk of the revenue that would otherwise have gone to the federal government, by destroying that revenue.
  - darawk 8y ago
    I'm not sure I follow you. How can they eat the federal government's revenue by destroying income if it can't be deducted? Are you saying that the economic equilibrium of a higher income tax will be lower pre-tax incomes? That's certainly an interesting theory, though it doesn't comport with any of the empirical data.
    - thaumasiotes 8y ago
      > How can they eat the federal government's revenue by destroying income if it can't be deducted? Because you can't collect taxes on income that doesn't exist, obviously. > Are you saying that the economic equilibrium of a higher income tax will be lower pre-tax incomes? That's certainly an interesting theory, though it doesn't comport with any of the empirical data. Yes, of course that's what I'm saying. This is the same idea as how taxing oil sales will necessarily lower the dollar volume of oil sales. What model are you aware of that doesn't directly imply this?
      - darawk 8y ago
        The model where the highest tax states have the highest incomes, and the lowest tax states have the lowest incomes. I.e. the one in which we actually live.
        thaumasiotes 8y ago
        That model doesn't say anything about the effect of taxes. You can just as easily say that high incomes cause high taxes. Is that all the "empirical data" you were thinking of?
- dragonwriter 8y ago
  > Under the old system, if your home state charged say, a 10% income tax, that would reduce your federally taxable income by 10% And under the new system, it would do exactly the same thing, unless your income is over $100,000/yr, because it's simply designed to adversely effect the political calculus for upper-income taxes, both to reduce political pressure for tax progressivity at the state level and to reduce the viability of high-cost-of-living communities. Lots of people defending the policy here are acting as if it was a principled rejection of the SALT deduction rather than a calculated strategic limitation on its applicability, and are defending a policy that doesn't exist instead of the actual policy.
kbenson 8y ago
I think what's being referred to was the ability to write off state taxes, which lowered your overall net income in the government's eyes, and thus what you were responsible for paying. It's not that states shouldn't be able to tax, it's that this particular write-off made higher state taxes more palatable at the expense of Federal taxes.

I'm not saying states shouldn't levy taxes. I'm saying that state taxes shouldn't diminish federal taxes. Under the old system, if your home state charged say, a 10% income tax, that would reduce your federally taxable income by 10%. That means that states could essentially eat a chunk of the revenue that would otherwise have gone to the federal government.

jrs235 8y ago
What the Republicans should have done was get rid of the federal income tax, have all taxes apportioned, and leave it to the states to decide how they wish to collect the revenue needed to pay the federal government.
- darawk 8y ago
  That's certainly an interesting proposal that seems reasonable to me. But I think we both know it's way too radical to be remotely politically feasible. I'd vote for it if I could though.
- DevX101 8y ago
  Republicans would never do this. Republican states are net recipients of federal money. Wealthy democratic states are net givers of federal money. Poor states like Mississipi are funded in large part by the wealth democratic states that their politicians like to attack.
- conanbatt 8y ago
  It might be a good idea to do it this way, but it is a very radical change with high chances of errors. What if 10 states enact some abhorrent legislation and makes them broke, or collect no taxes? I'd think this kind of change requires constitution ammendment level coordination.
  - dsfyu404ed 8y ago
    > have all taxes apportioned, and leave it to the states to decide how they wish to collect the revenue needed to pay the federal government. Let them crash and burn and serve as an example of the kind of policy you shouldn't enact. There's 50 states and interstate migration is not restricted. At a national level people do very much have the ability to pick one of the 49 other ships if the one they are on is sinking. Sure it would suck for the people who don't see the writing on the wall when their state is going down but I think it would be less damaging in the long term than the status quo.
    - conanbatt 8y ago
      Well you will need plenty of states to vote this change, and I think they would vote against it, even if on paper it gives them more economic power and independence.
- jdhn 8y ago
  I would've liked to seen them completely eliminate the mortgage and property tax deduction. Those two aren't taxed at the local level, unlike income which is.
- tomp 8y ago
  How much revenue would you levy from each state? What would be a fair way to decide that? The point of income taxes is, that we (the society) consider them fair - the high-income-earners don't only pay more taxes in absolute terms, but also in relative terms, because of progressive taxation (personally, I think that tax rates should be based on wealth, not income, and that capital gains should be taxed equally as income, but I'm clearly in the minority with that opinion).
  - jrs235 8y ago
    Population? Fair? That's a conversation. (Personally I think wealth should be taxed somehow too. What's fair? Another conversation. I too think capital gains should be taxed at the same rate or higher than income.)
thaumasiotes 8y ago
> Under the old system, if your home state charged say, a 10% income tax, that would reduce your federally taxable income by 10%. No, it would reduce federally taxable income by more than 10%, because an income tax will lower income levels in the state. Even after eliminating the deduction for local taxes, the state income tax is lowering federal tax receipts. States can always eat a chunk of the revenue that would otherwise have gone to the federal government, by destroying that revenue.
- darawk 8y ago
  I'm not sure I follow you. How can they eat the federal government's revenue by destroying income if it can't be deducted? Are you saying that the economic equilibrium of a higher income tax will be lower pre-tax incomes? That's certainly an interesting theory, though it doesn't comport with any of the empirical data.
  - thaumasiotes 8y ago
    > How can they eat the federal government's revenue by destroying income if it can't be deducted? Because you can't collect taxes on income that doesn't exist, obviously. > Are you saying that the economic equilibrium of a higher income tax will be lower pre-tax incomes? That's certainly an interesting theory, though it doesn't comport with any of the empirical data. Yes, of course that's what I'm saying. This is the same idea as how taxing oil sales will necessarily lower the dollar volume of oil sales. What model are you aware of that doesn't directly imply this?
    - darawk 8y ago
      The model where the highest tax states have the highest incomes, and the lowest tax states have the lowest incomes. I.e. the one in which we actually live.
      - thaumasiotes 8y ago
        That model doesn't say anything about the effect of taxes. You can just as easily say that high incomes cause high taxes. Is that all the "empirical data" you were thinking of?
dragonwriter 8y ago
> Under the old system, if your home state charged say, a 10% income tax, that would reduce your federally taxable income by 10% And under the new system, it would do exactly the same thing, unless your income is over $100,000/yr, because it's simply designed to adversely effect the political calculus for upper-income taxes, both to reduce political pressure for tax progressivity at the state level and to reduce the viability of high-cost-of-living communities. Lots of people defending the policy here are acting as if it was a principled rejection of the SALT deduction rather than a calculated strategic limitation on its applicability, and are defending a policy that doesn't exist instead of the actual policy.

kbenson 8y ago

I think what's being referred to was the ability to write off state taxes, which lowered your overall net income in the government's eyes, and thus what you were responsible for paying. It's not that states shouldn't be able to tax, it's that this particular write-off made higher state taxes more palatable at the expense of Federal taxes.