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Capping the SALT deduction doesn't stop states from raising their own taxes — it just makes it harder to hide higher state taxes behind Federal deductions. Keep

by bhupy 6y ago

Capping the SALT deduction doesn't stop states from raising their own taxes — it just makes it harder to hide higher state taxes behind Federal deductions. Keep in mind that State and Federal governments are two independent sovereign state actors, with their own expenditures and services. Both have to be paid for somehow, and SALT tax deductions just hide the true cost at the state and local level. Also, the SALT deduction overwhelmingly benefited the rich, who arguably don't pay enough in taxes.

scarface74 6y ago
Yet the states with high taxes pay more to the government than they receive compared to the states with lower taxes.
- bhupy 6y ago
  This is: 1. Not true of all low tax states (Nevada, Washington, New Hampshire, South Dakota, etc) 2. More representative of which states have the most senior citizens and military bases, because most of the Federal budget goes into Medicare, Social Security, and the military. 3. Better alleviated by directly targeting net-takers rather than trying to approximate which states are net givers and takers based on the state and local tax rates, which is ham-fisted
  - scarface74 6y ago
    Mississippi, Alabama, Kentucky , etc have more senior citizens? Even many of the military bases are just unneeded make-work facilities for civilians. The military leadership has constantly been blocked from closing bases that it said it didn’t need by Congress. There are many military bases that are really just poorly disguised subsidies. And just so I can’t be accused of quoting sources from the “liberal media” https://www.militarytimes.com/news/pentagon-congress/2019/08/15/plans-for-a-new-base-closing-round-may-be-running-out-of-time https://www.militarytimes.com/news/pentagon-congress/2019/08... Social security and Medicare are also just another form of government subsidizing people. No, what they paid in doesn’t come close to paying for what they received. https://www.politifact.com/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo/ https://www.politifact.com/article/2013/feb/01/medicare-and-...
    - bhupy 6y ago
      > Mississippi, Alabama, Kentucky , etc have more senior citizens? That...wasn't the argument. On average the pattern of "net-takers" and "net-contributors" is a proxy for where senior citizens live because Social Security and Medicare account for over half of the Federal budget. Yes, there are outliers (like Mississippi, Alabama, Kentucky), but there are outliers in the other direction as I pointed out (Washington, Utah, South Dakota, New Hampshire). I addressed this in the final point, that the disparity is: "3. Better alleviated by directly targeting net-takers rather than trying to approximate which states are net givers and takers based on the state and local tax rates, which is ham-fisted" > No, what they paid in doesn’t come close to paying for what they received. None of your sources actually adjust for Medicare/SS/military expenditure.
      - scarface74 6y ago
        Military expenditure is often a disguised expenditure to redistribute taxes to states. The military wants to close bases and the civilian leadership won’t allow them because of job loss. Social Security especially is a method to redistribute taxes. The amount most senior citizens get from SS is much less they put in - even if you account for inflation.
        bhupy 6y ago
        This is factually untrue: https://www.marketwatch.com/story/these-7-social-security-myths-just-arent-true-no-matter-how-often-you-hear-them-2019-08-27 https://www.marketwatch.com/story/these-7-social-security-my... In fact, research shows that accounting for Social Security essentially cancels out the recent increase in inequality: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3546668 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3546668
        scarface74 6y ago
        Your article didn’t contradict that most people get more than they put in. https://www.politifact.com/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo/ https://www.politifact.com/article/2013/feb/01/medicare-and-... According to the institute’s data, a two-earner couple receiving an average wage — $44,600 per spouse in 2012 dollars — and turning 65 in 2010 would have paid $722,000 into Social Security and Medicare and can be expected to take out $966,000 in benefits. So, this couple will be paid about one-third more in benefits than they paid in taxes. > In fact, research shows that accounting for Social Security essentially cancels out the recent increase in inequality Doesn’t that support my point that the higher tax states actually subsidize poorer states? I’m a bleeding heart capitalist. I believe in the social safety net. But, the entire point of my post was arguing against the idea that states with high taxes and limiting SALT was unfair to states that pay less in taxes.
lotsofpulp 6y ago
Yes, all deductions hide the true costs. I don't see why people would be for SALT deductions. The only purpose (which deductions accomplish poorly) of a deduction is to reward the activity that qualifies for the deduction. I don't see why paying taxes should qualify for a deduction. Then again, I'm in favor of removing all deductions. If government wants to incentivize some activity, then they should just pay for it. That way it can be properly accounted for. Edit: I typo'd and wrote "I don't see why people would be against SALT deductions" instead of "I don't see why people would be for SALT deductions".
- JediWing 6y ago
  SALT deductions (at least on Income Tax) are essentially meant to prevent double-taxation. Why can the federal government tax money that can only possibly be in my pocket if I've committed tax fraud against my state? If I make 100K and my state takes 5%, I now only have 95K. There's no option for me not to pay 5K to my state. (and no, for most people uprooting yourself for tax purposes isn't a tenable option) Now, I have to pay the federal government. Why should I be on the hook to pay taxes on 100K in income, when I truly only earned 95K? With sales tax, you could theoretically not buy things subject to sales tax. With real estate tax, you could in theory just rent. Yes, in practice it's not like taxes are so punitive that > 100% of my income will be demanded, but it seems unfair to levy such taxes. This assumes, of course, that the state has the first dibs on a person's income. I'd be just as happy if the federal government amended the constitution saying that all states levying income tax must deduct federal taxes paid from taxable income amounts.
  - bhupy 6y ago
    Taxation is just the price of the basket of services a government offers to its citizens. We don't deduct prices of other goods & services (food, clothing, rent, transportation) from our salaries before paying taxes on them, do we? It's no more double taxation to pay all of the different governments for their different basket of services as it is "double payment" to pay different service providers the price of their goods & services independent of one another.
takeda 6y ago
SALT deduction was there so you weren't taxed on money that you never got (because it went to pay taxes).
- bhupy 6y ago
  That's not how taxes work though. I pay for a ton of other things besides State taxes, like my Spotify subscription, my rent, my food, my transportation — why not deduct all of that before paying taxes as well? The State and Local governments provide a basket of services, and taxation is the price of those services. It's no more double taxation to pay all of the different governments for their different basket of services as it is "double payment" to pay different service providers the price of their goods & services independent of one another.
  - takeda 6y ago
    Because the state tax is not a Spotify subscription?
    - bhupy 6y ago
      The State tax is a (variable) price we pay for the benefit of living in the State and enjoying the services it offers (policing, fire departments, libraries, schools, utilities, roads, property rights, etc) A Spotify subscription is a price we pay for the benefit of unlimited music streaming. Both represent an exchange of money for services.

by bhupy 6y ago

scarface74 6y ago

Yet the states with high taxes pay more to the government than they receive compared to the states with lower taxes.

bhupy 6y ago
This is: 1. Not true of all low tax states (Nevada, Washington, New Hampshire, South Dakota, etc) 2. More representative of which states have the most senior citizens and military bases, because most of the Federal budget goes into Medicare, Social Security, and the military. 3. Better alleviated by directly targeting net-takers rather than trying to approximate which states are net givers and takers based on the state and local tax rates, which is ham-fisted
- scarface74 6y ago
  Mississippi, Alabama, Kentucky , etc have more senior citizens? Even many of the military bases are just unneeded make-work facilities for civilians. The military leadership has constantly been blocked from closing bases that it said it didn’t need by Congress. There are many military bases that are really just poorly disguised subsidies. And just so I can’t be accused of quoting sources from the “liberal media” https://www.militarytimes.com/news/pentagon-congress/2019/08/15/plans-for-a-new-base-closing-round-may-be-running-out-of-time https://www.militarytimes.com/news/pentagon-congress/2019/08... Social security and Medicare are also just another form of government subsidizing people. No, what they paid in doesn’t come close to paying for what they received. https://www.politifact.com/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo/ https://www.politifact.com/article/2013/feb/01/medicare-and-...
  - bhupy 6y ago
    > Mississippi, Alabama, Kentucky , etc have more senior citizens? That...wasn't the argument. On average the pattern of "net-takers" and "net-contributors" is a proxy for where senior citizens live because Social Security and Medicare account for over half of the Federal budget. Yes, there are outliers (like Mississippi, Alabama, Kentucky), but there are outliers in the other direction as I pointed out (Washington, Utah, South Dakota, New Hampshire). I addressed this in the final point, that the disparity is: "3. Better alleviated by directly targeting net-takers rather than trying to approximate which states are net givers and takers based on the state and local tax rates, which is ham-fisted" > No, what they paid in doesn’t come close to paying for what they received. None of your sources actually adjust for Medicare/SS/military expenditure.
    - scarface74 6y ago
      Military expenditure is often a disguised expenditure to redistribute taxes to states. The military wants to close bases and the civilian leadership won’t allow them because of job loss. Social Security especially is a method to redistribute taxes. The amount most senior citizens get from SS is much less they put in - even if you account for inflation.
      - bhupy 6y ago
        This is factually untrue: https://www.marketwatch.com/story/these-7-social-security-myths-just-arent-true-no-matter-how-often-you-hear-them-2019-08-27 https://www.marketwatch.com/story/these-7-social-security-my... In fact, research shows that accounting for Social Security essentially cancels out the recent increase in inequality: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3546668 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3546668
        scarface74 6y ago
        Your article didn’t contradict that most people get more than they put in. https://www.politifact.com/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo/ https://www.politifact.com/article/2013/feb/01/medicare-and-... According to the institute’s data, a two-earner couple receiving an average wage — $44,600 per spouse in 2012 dollars — and turning 65 in 2010 would have paid $722,000 into Social Security and Medicare and can be expected to take out $966,000 in benefits. So, this couple will be paid about one-third more in benefits than they paid in taxes. > In fact, research shows that accounting for Social Security essentially cancels out the recent increase in inequality Doesn’t that support my point that the higher tax states actually subsidize poorer states? I’m a bleeding heart capitalist. I believe in the social safety net. But, the entire point of my post was arguing against the idea that states with high taxes and limiting SALT was unfair to states that pay less in taxes.

lotsofpulp 6y ago

Yes, all deductions hide the true costs. I don't see why people would be for SALT deductions. The only purpose (which deductions accomplish poorly) of a deduction is to reward the activity that qualifies for the deduction. I don't see why paying taxes should qualify for a deduction. Then again, I'm in favor of removing all deductions. If government wants to incentivize some activity, then they should just pay for it. That way it can be properly accounted for. Edit: I typo'd and wrote "I don't see why people would be against SALT deductions" instead of "I don't see why people would be for SALT deductions".

JediWing 6y ago
SALT deductions (at least on Income Tax) are essentially meant to prevent double-taxation. Why can the federal government tax money that can only possibly be in my pocket if I've committed tax fraud against my state? If I make 100K and my state takes 5%, I now only have 95K. There's no option for me not to pay 5K to my state. (and no, for most people uprooting yourself for tax purposes isn't a tenable option) Now, I have to pay the federal government. Why should I be on the hook to pay taxes on 100K in income, when I truly only earned 95K? With sales tax, you could theoretically not buy things subject to sales tax. With real estate tax, you could in theory just rent. Yes, in practice it's not like taxes are so punitive that > 100% of my income will be demanded, but it seems unfair to levy such taxes. This assumes, of course, that the state has the first dibs on a person's income. I'd be just as happy if the federal government amended the constitution saying that all states levying income tax must deduct federal taxes paid from taxable income amounts.
- bhupy 6y ago
  Taxation is just the price of the basket of services a government offers to its citizens. We don't deduct prices of other goods & services (food, clothing, rent, transportation) from our salaries before paying taxes on them, do we? It's no more double taxation to pay all of the different governments for their different basket of services as it is "double payment" to pay different service providers the price of their goods & services independent of one another.

takeda 6y ago

SALT deduction was there so you weren't taxed on money that you never got (because it went to pay taxes).

bhupy 6y ago
That's not how taxes work though. I pay for a ton of other things besides State taxes, like my Spotify subscription, my rent, my food, my transportation — why not deduct all of that before paying taxes as well? The State and Local governments provide a basket of services, and taxation is the price of those services. It's no more double taxation to pay all of the different governments for their different basket of services as it is "double payment" to pay different service providers the price of their goods & services independent of one another.
- takeda 6y ago
  Because the state tax is not a Spotify subscription?
  - bhupy 6y ago
    The State tax is a (variable) price we pay for the benefit of living in the State and enjoying the services it offers (policing, fire departments, libraries, schools, utilities, roads, property rights, etc) A Spotify subscription is a price we pay for the benefit of unlimited music streaming. Both represent an exchange of money for services.