Well then let’s keep it all perfectly equitable. Fair is fair. Every state gets back $1 for every $1 they send to the feds.
Funny how that will affect the people who “choose” to live in low tax states. Those states will lose a lot if we enforce strict rules about fairness.
@sylvan8798 agree, so ask you state to reduce the hefty property tax to reasonable amount. For instance, Minnesota has levied less property tax and paid more federal tax than California and NY state (2015 data per capita)
Ah yes, the “red states take more than they pay to the government” story.
I have wondered about the methodology of calculating this for quite some time. From what I can tell, the methodology simply considers all expenditures as belonging to the state where it happens, and all revenues as belonging to the state from where it is paid.
If so, this is flawed for two reasons. First, defense expenditures get attributed to the states with military bases, which tend to be more in red states, even though defense benefits the whole country. Second, corporate taxation gets counted from the state where the company is headquartered, even though the operations of the company could be distributed throughout the country.
Anybody have details on the methodology and how they apportion the corporate taxes and defense spending?
@nhsmom, no I mean property tax and state income tax businesses can still deduct. Only individuals had this deduction taken away.
That is something to consider. For all the talk about SALT tax breaks, as if people from other states are subsidizing those…many times it’s the other way around. The people paying high SALT are often from donor states, and they are the ones subsidizing others. Plus the fact that a job might pay 300K in a high cost state, but $150K in a low cost state…the exact same job, yet the 300K worker is paying far higher taxes.
I don’t think much of this has to do with fairness at all. It’s whatever deals your representatives can work out, and they are all just grabbing for their piece of the pie, for their constituents.
I don’t think you want to do that. You say $1 for $1? Why then am I paying tax at 37% on my income when the vast majority pay 10-24%? I want all my money back. I happily paid higher taxes thinking it was for social cohesion. Did someone say price to pay for a better society? Now if rich states refuse to contribute to make a better society why should an individual bother?
The same money is taxed multiple times routinely. If you earn a salary and pay federal income taxes on it, you may well pay state and local income taxes as well. And you will pay sales taxes, real estate taxes, fuel taxes, phone taxes, energy taxes, etc all on that after tax income.
In terms of what is being said about paying it back, assume you would owe $20,000 in federal income taxes without deducting real estate taxes. You pay a 10% income tax rate. You pay $30,000 in real estate taxes. As a result of that deduction, you would owe $17,000 in federal income taxes. From your perspective, the feds paid you back $3,000 of the real estate taxes you paid.
@sylvan8798 I think @saillakeerie just very well answered your question
My high-tax state pays for low income people to get health care. Mississippi doesn’t, so my federal tax dollars go to shore up their unhealthy state.
Now I’m ALSO supposed to get taxed on the tax dollars I pay so my state isn’t like Mississippi, even though I’m already paying for Mississippi’s bad health policy?
Mississippi is already leaching off my tax dollars. Enough.
Sure, if you want to use one of the poorest states in the union, you can make just about any argument you want.
Instead, let’s use New Hampshire, which has low taxes overall, and neighboring Massachusetts, which has considerably higher taxes.
Now it turns out that the average income for both states is almost exactly the same. But people in Massachusetts get the privilege of paying less Federal Tax due to higher SALT deductions. Why is that fair?
By the way, I live in Massachusetts, so I am not giving a self-interested position.
Why is it better for the federal government to have tax dollar $X rather than the state or local government?
Your example is not entirely accurate. Your first claim that federal and state/local taxes are currently double-taxed is only partially correct. First the state gets their cut, but then the feds tax you on what’s left after the state gets its cut. So you’re not being taxed on money you don’t have (i.e. the money you paid to the state).
Same goes for fuel taxes and other point-of-use taxes - you’re being taxed on money you’re spending, or money you have. You’re not being taxed on money you don’t have.
When the feds start taxing you on money you don’t have because the state already took it, that’s logically and factually a separate issue from applying taxes to money you have leftover after being taxed. I’m going to respectfully disagree with those who believe being taxed on money you don’t have is common sense.
The Federal taxes are the cost you to pay to live in a country and receive its benefits, protections, and services. If that is completely unsatisfactory to you, you have nuclear option of leaving (and possibly giving up citizenship).
The State taxes are the cost to you to live in a state and receive its benefits and services. Again, you have the option of moving if the state taxes are too onerous to you.
I would think the party of states’ rights would welcome the chance to allow states to better self fund through their own taxes. Why would they want to take even more taxes from states that are already givers? :-??
@sylvan8798 do we need federal government? if we do, we pay our fair share. there is no better or worse. we pay taxes to school district, village/county, state, and federal. how do we proportionate the money in each level would call fair though. If a bill passed with 95% of people would benefit from it, we call it fair. I reckon that.
@greenwitch , even better, send zero money to the federal government and get nothing back. That would put us a lot closer to the original design.
The biggest factor in who pays more is the progressive tax code. High income earners tend to be concentrated in the major cities in the blue states, for a wide variety of reasons. That is why I would rationally expect blue state taxpayers to support a flat income tax. That they support a progressive tax is against their self-interest and frankly, rather stupid. They are the ones who are hurt the most with the extremely high cost of living on top of high taxes. That would dramatically change the relationship of revenue sent and received from the federal government and improve life in their states. They could merrily tax themselves at whatever rate they wanted and keep all of the money in their own state*, instead of sending it somewhere else!
Defense spending is concentrated in coastal and border regions, so those states get more revenue. Note that this includes most of the blue states. Very small states with a low GDP can also have their ratio disproportionally affected by government installations or military bases and contractors, like when ND had missile bases. The DC/Northern Virginia/Maryland area sucks money from the rest of the country, but consequentially VA and MD have very favorable ratios.
The two biggest government expenditures are social security and medicare. People tend to migrate to warmer, southern, low tax climates when they retire. *NY, for example, is a huge loser because so many state government retirees move to Florida, taking their state pensions (paid by current NY taxpayers), social security, and medicare money with them.
Finally you have poverty payments - WIC, Medicaid, etc. The poorest states (e.g. Mississippi) tend to receive more money, but states like California also do. Many of those poor states did not participate in the medicaid expansion, so the impact is somewhat blunted.
The picture is very complex. You might note that only the federal government comes out the winner, the people and the states mostly lose.
Heard a SoCal CPA advise that yes, those who can prepay their second property tax installment should do so, but that if you’ll be subject to the AMT there’s no advantage to doing so. I wasn’t clear on if he meant that he meant those who’ll be paying AMT for 2017 or for 2018. Impossible to know who’ll be paying AMT for 2018. So we’ll do it anyway, since no way are we going to get to write it off at full value in 2018.
Spouse has been mulling career change for years. Will now see how much the tax advantages that would come from incorporating etc etc would make up for loss of income in salaried position.
National Park entry fees for cars at at least some locations (e.g. Yosemite) proposed to go up from $25 to $70 so that is one place where people can park (haha!) their tax savings. I’m sure there will be many many more examples to come.
Let’s not get into insulting blue state residents who inexplicably want to help poor people, unlike rational red state rich people who are stalwart and resolute and want poor people to die.
This is actually funny; the “job creation” bill creates jobs… for robots. The pass-through deduction was initially limited to 50% of wages paid by the company, so that only companies that created jobs for people could take advantage of it. But in the final bill, it is also available for companies that buy machinery, even if they borrow money to do it. So your company can fire all its workers, buy robots to replace them, and still you can get the juicy pass-through deduction for the income from your company.
My favorite of the listed strategies is #7. It’s difficult to execute this strategy, but if you do, you profit bigly.
Red states tend to contribute much to charity, FYI.