Anyone wants to move from Massachusetts to Nebraska?

<p>The money flowing out of one state to another has nothing to do with social security. The usual source for that information is the Tax Foundation, which is mostly known for “tax freedom day”. It is not a liberal bastion. Its president, for example, spent something like a decade at Heritage. </p>

<p>Their latest data is 2005 but they track from 1981 to then. They say they’re trying to update but that it’s tough to get good data. </p>

<p>They do not include social security. They essentially take federal taxes paid for each state and compare that to actual federal spending received by each state. They have an adjustment for debt financed spending. (You have to read the footnote.) </p>

<p>As they say, progressive taxation means richer states pay more and receive less because a lot of federal money is spent alleviating poverty-related stuff. That includes Medicaid. That is why I said the richer, more liberal states subsidize the regressive policies of the poorer states. (And I was somewhat tongue-in-cheek saying we should keep our tax revenue.)</p>

<p>I’ve heard all sorts of arguments about these numbers. Military spending. Well, if you look at the numbers, that is some of it but that isn’t a consistent factor. It doesn’t account for states like CT or CA, etc. that pay out much more in taxes but which receive a lot of federal military related spending (including contracts). I could list other states.</p>

<p>

Not counting social security as “Federal money” seems pretty arbitrary and somewhat ridiculous, considering the taxes are paid to the Federal gov’t and the benefits are paid by the Federal gov’t. It was this kind of thinking that made it possible for the surplus funds paid in to SS to be siphoned off with little notice.</p>

<p>I can’t think of any reporting I’ve seen on budget issues that doesn’t lump SS in with everything else.</p>

<p>If you want to define “Federal money” for this discussion as not including money from FICA, that’s fine, but you need to define your terms up front. That NYT article, for example, mentions disability benefits as an example of Federal money that disproportionally flows to the poor states. Disability benefits are a SS program, which by your definition isn’t in the Federal budget. You can’t have it both ways.</p>

<p>

Does this happen because they are richer, or because they have progressive state tax policies?</p>

<p>Isn’t access to Federal programs based on gross income, not income after state taxes?</p>

<p>My state, which is #2 or so in per capita income, is a net donor (#11 according to Wikipedia [Federal</a> taxation and spending by state - Wikipedia, the free encyclopedia](<a href=“http://en.wikipedia.org/wiki/Federal_taxation_and_spending_by_state]Federal”>Federal taxation and spending by state - Wikipedia) ) yet we have an almost completely flat income tax. So it doesn’t seem like our regressive tax system is bringing in the bucks for us.</p>

<p>NH is a net donor state too and has no general income taxes. Of course it doesn’t have sales taxes either. It relies heavily on the property tax - I’m not sure whether or not that is regressive. I guess it depends on whether people buy property relative to their income.</p>

<p>“Disability benefits are a SS program, which by your definition isn’t in the Federal budget. You can’t have it both ways.”</p>

<p>I believe the disability benefits discussed are through the SSI program which is not paid for through payroll deductions and is a completely separate program from SSDI. SSI is strictly need based and is means tested and is funded by general fund taxes not payroll taxes as Social Security and SSDI is.</p>

<p>Again, this is federal tax money, not state tax rates. Put that out of your head. The difference is some states have higher income earners and those pay more in federal taxes because the federal tax code is progressive. The point I made about Vermont and Mississippi was about differences in state taxation: Vermont has progressive taxation that means poor people pay less than poor people pay in Mississippi, which has more regressive tax policies. </p>

<p>The income of a state is why NH is a donor, not a receiver. NH in 2005 - latest real data, remember - got back less than 70 cents on every dollar sent to DC. That said, Tax Foundation - which also calculates tax burdens and other taxpayer-friendly metrics - doesn’t seem to analyze the effect of state tax systems on the amounts sent to DC. So for example, I see that Vermont is a receiving state; it gets more than $1 for every $1 in federal taxes. Why? Is some of that because VT has a progressive income tax so higher earners pay more and gain more of a state tax deduction? I don’t know. I have not seen any reasonable analysis of these issues beyond the headline figures.</p>

<p>BTW, these points were all raised in a number of places when GWBush ran for office and then when Obama first ran. It was pointed out that the states voting GOP were, with like one exception - Texas is barely a donor state (but makes a lot of noise about that) - all net receivers of federal tax money. Poor New Jersey fares the worse: less than 60 cents on the dollar comes back.</p>

<p>The NYT article is directly stating that regressive state tax systems directly leads to those states receiving more than their fair share of Federal outlays:</p>

<p>

</p>

<p>Do you believe there is a direct cause and effect? Or would states still be net donors/recipients regardless of what their state tax systems are like?</p>

<p>“The NYT article is directly stating that regressive state tax systems directly leads to those states receiving more than their fair share of Federal outlays:”</p>

<p>Yes, because they don’t have enough in state money for poverty programs, due to their regressive taxation, so the federal government has to pick up the slack - which is why they get back more in fed $$$ then they give and the reason why the rich states give more than they get back. The rich states are paying to take care of their poor people with their own state’s money while the moocher states fob it off on the feds.</p>

<br>

<br>

<p>That’s a big surprise to me. I always thought that Vermont was pretty well off with lots of vacation homes from people in NY.</p>

<p>Let me rephrase the question:</p>

<p>What Federally-funded benefits can you be eligible for because you are paying more in state taxes, that you otherwise wouldn’t be eligible for if you weren’t paying state taxes?</p>

<p>If the poor were paying less in state taxes, they would need fewer benefits.</p>

<p>Why do states have regressive tax systems?</p>

<p>Let’s devise a tax system…let’s see… The poor don’t have much…let’s tax them the most as a percentage of income and wealth…</p>

<p>Yeah…that makes sense…</p>

<p>the top 10% pay 70% of taxes up from 55% in the 80’s…enough said</p>

<p>^ That’s only half the story.</p>

<p>You also need to know the % of income of the top 10%.</p>

<p>In 2009: income (AGI) 43.2%, taxes 70.5%
In 1987 (after tax reform): income (AGI) 36.9%, taxes 55.6%</p>

<p>So: income share up 17%, tax share up 26%.</p>

<p>The burden is a little higher but not extreme. That’s a pretty big shift in income to the upper end though.</p>

<p>And almost 100% of that increase in income share went to the top 5%. The income share of the 5-10% range has been constant for 30 years at around 11%. The income share of the top 5% has gone from 21% of all income to 32%, and for the top 1% from 8.5% to 17%.</p>

<p>An underlying question is which approach is best and then what that means for policy. I’ve been hearing since the rise of the New South that low wages / low taxes (meaning a non-progressive tax system) is the best economic approach. That argument rapidly devolves into side show arguments but we can say without a doubt - because we have this tax and spending data - that the more liberal states, particularly those in the north and on the west coast - have been subsidizing the social and economic experiment of low wages / regressive state tax policies. Or in blunter words, the liberal, mostly northern states have paid the conservative, mostly southern states to maintain a system which seems to generate a continuing amount of poverty when compared to the subsidizing states. </p>

<p>I don’t say this means anything. I find it humorous. Take the calls for secession from states like South Carolina. They receive a very large subsidy over their tax payments. I assume that without this subsidy some thing would change. Maybe they’d have to change tax regimes to mollify their citizenry - which is now in substantial part being mollified by my tax money flowing out of MA. Maybe they’d stick to their guns and maybe that would lead to an exodus of people. I don’t know. But without the subsidy, they would be confronted by the reality that they have been able to maintain a tax and social policy using the support of others. Without that support, they would need to change taxes dramatically just to match what they currently provide using this subsidy.</p>

<p>I think about the cost of subsidy fairly often. For example, analysis of conflicts has shown that subsidy perpetuates violence. It was only when subsidy was removed, for example, that fighting in Cyprus died down. </p>

<p>The interesting thing is we engage in subsidy without awareness. Most Americans don’t realize we pay to maintain Hamas’ conflict with Israel - and to a lesser degree Hizbollah, but that is more complicated. Hamas is a government. It runs a place. A government normally has to provide basics like food, healthcare, education and security. But Hamas is relieved from a large portion of those responsibilities because the UN has UNRWA, the only organization devoted to a permanent class labeled “refugees”. UNRWA provides food, healthcare and education and other social services - not security - and that means Hamas does not have to do this. They can use their resources for other things, from weaponry and oppression of their own people to other education (some good, some bad) and other healthcare. We make them look good because they have the money and time to do works that reflect well on them, even as we make them more powerful. And by how much? We paid UNRWA $239 million in 2011. Some of that went to Lebanon, some - not sure how much may have gone into Syria but I don’t know given the situation - and some went into the West Bank. But a large number of millions of dollars is a subsidy for Hamas. And we don’t even think about that.</p>

<p>The issue is really not one of liberal or conservative but of whether subsidy distorts behavior in ways you don’t want. When we subsidize regressive taxation by Mississippi, aren’t we encouraging policies at the state level that penalize poor people? But beyond that, aren’t we enabling the people of Mississippi to avoid dealing with their own problems? Shouldn’t they deal with them? By the same token, when we subsidize UNRWA, we encourage all sorts of behaviors that lead to violence, from the literal freeing of money and time for weaponry and militarism to the encouragement of more children. Remember, without subsidy, the actual cost of bearing children would be born by families. With the subsidy, they can rely on our money so they have no incentive to reduce the number. Every study of conflict shows the “hotness” directly correlates to the number of young men available to die.</p>

<p>This is an irony I find delicious: the mostly Southern states want to reduce the amounts spent on the poor - cut Medicaid, food stamps, etc. - and yet they can make that argument because they are subsidized to a level and they don’t want to spend more beyond that. If they had to bear the actual cost of the benefits now provided - and as has been provided - what would they do? So the real complaint is “the subsidy isn’t big enough to induce me to change my tax and social policies”. It’s like saying, “I want more of your money.”</p>

<br>

<br>

<p>On a wider international scale, we have low-wage and low-tax approaches in various Asian countries. They even go so far as to debase their currencies for competitive advantage in gaining more jobs; even if those jobs don’t pay anywhere near as much as they would over here. They seem to have found some measure of success in this approach.</p>

<br>

<br>

<p>How do you feel about QE and the Fed’s suppression of interest rates? My money market account is subsidizing the likes of Goldman Sachs and Bank of America. I suppose that you could tell me to get out of my money market accounts but there aren’t a lot of good alternatives so we have to gamble to get any kind of yield.</p>

<p>The wealthier nations in Europe have been bailing out the weakest though grudgingly. We’ve ridiculed them asking whether or not they really are a union as we seem to do a better job supporting our weaker states. Would you prefer a breakup of the US?</p>

<p>The standard of living in places like China or Vietnam is nowhere near the US. They are using their poverty to build their countries. I’m not sure that has much of a lesson for the US. A better example might be Germany. The Germans accepted a long time ago that they not only were but wanted to be a higher cost country (because high cost means high social benefits, like vacations, healthcare, education, etc.) They had a temporary advantage from the absorption of the East - speaking about wage rates - but they export a tremendous amount, including to Asia, and generally have positive trade balances. How? They’ve pushed more upmarket, adding technology, defining tolerances ever tighter, plus a lot of other things too complicated to discuss. </p>

<p>One can argue that Malaysia is a model for the future but one should understand that means a drastic cut in American living standads. If that is the notion hidden behind the idea I keep hearing that Americans are lazy, then I don’t see much good coming. If indeed the idea is to impoverish more people so we can compete with lower cost countries, then … odds are very few people will be winners and most will be losers in that world. </p>

<p>I see extremely low interest rates as a marker of the mess we’re in. And this mess was created by financial deregulation, not by government lending. Let’s say the Fed raised rates. That might drive us into deflation, which would make the debts worse. I can’t imagine the effect on the economy would be good; rates go up when economic activity reaches a level that warrants a rate increase and associated signals or when inflation is high and growth low (though that has happened only 1 time and thus isn’t to me much of a case). </p>

<p>So far the best investment has been to ride what the Fed has been doing to the stock market. But I have no idea what should or will happen. </p>

<p>I’d say a main problem in Europe has been the northern nations refusal to admit they, as creditors, are part of the problem. Even today, they are pushing for debtors to act. The ECB is under huge pressure to step away, even after they had to act to keep the Euro from absolutely imploding not long ago. </p>

<p>As to the US, I wish people would recognize what they receive. That would be a start but I don’t see it happening. The subsidies some states receive is like the “get your government hands off my Medicare” nonsense: they can’t see they get it and can’t see how it affects their policies, how it subsidizes them and so they aren’t honest with themselves. Again, it’s humorous and sad: the northern states subsidize southern states who say over and over they hate government spending even as that spending allows them to maintain tax and policy regimes which would otherwise be very difficult to maintain.</p>

<p>Lergnom, I read and liked your post.</p>

<p>The MA Legislature proposed a $500 Million tax increase to fix the MBTA and other transportation problems. The Patrick Administration is viewing this as a battle between investments while the Legislature is saying that they have a plan that is affordable for the middle class. It is unclear at this time whether or not the Legislature has enough votes to override the Governor’s veto.</p>

<p>I took a trip into Boston yesterday via the MBTA and everything was smooth except for us losing the car in front of us at Park St. The delay was only a few minutes. I did notice that there are a lot of riders even though I came in all the way from Woodland. Ridership seems to be very strong these days.</p>

<p>I had originally considered coming into Alewife but I looked up the station and when it fills up and I might not have gotten a space at the time I was coming in so I parked elsewhere. My impressions of Boston traffic (and this is going out to Route 495) is that it is awful and that it has gotten worse from this past fall. I guess good news for jobs can be bad news for driving.</p>

<p>The T’s problem is really simple: they lost the political war during the Big Dig financing mess. The politicians decided the T should take on somewhere near $2B in debt - the exact figures are harder to get right than one might believe because of the way the state allocates. Some of this money, all argue some, is related to mass transit. But say $1.7B on top. Add to that another $1.5B or so for transit projects that aren’t bus or subway but are rail projects, mostly commuter rail. So what happened is the Big Dig, which benefits only drivers and of course the regional economy, dumped as much debt as possible on to the backs of the people who commute by mass transit. Extremely unfair. They should have raised the gas tax, which I pay of course as a driver, because that would be more fair than forcing rate increases on people who rely on the subway and buses.</p>

<p>The Big Dig drained money for roads from all over the state. I have some bridges to show you in Lowell if you don’t believe me. I think that MA also fleeced the taxpayers from the entire country until Congress put a stop to it.</p>

<p>The gasoline tax is a problem because there’s a belief that the state has to be competitive with surrounding states there. NH would like to raise the gasoline tax too and MA raising rates would provide cover for other states to do so but nobody seems to want to go first. Gasoline taxes are going to have to rise across the country as gasoline consumption continues to decline. Unless we can use export taxes to pay for our roads and bridges.</p>

<p>[RIGZONE</a> - US Oil, Gas Production to Climb While US Energy Consumption Declines](<a href=“US Oil, Gas Production to Climb While US Energy Consumption Declines | Rigzone”>US Oil, Gas Production to Climb While US Energy Consumption Declines | Rigzone)</p>