Posted on 10/26/2017 7:40:48 AM PDT by Baynative
I have a serious question for anyone knowledgeable about taxes at the government and political level. I didn't want to post it in breaking news, but there are no topics that work in "Chat" so I'll just throw it out here to see if I can get some insight.
It seems to me that the legislators of those states have figured out a way to keep money within the state budget rather than sending it all to D.C. and then groveling to get back what they can.
If I am correct, it seems that a state such as Idaho where I live, could implement a state income tax with identical brackets to the federal schedule and effectually keep all of our money here and not let D.C. suck most of it up in bureaucracy.
Am I sniffing the right trail or completely lost?
The feds get theirs first. State taxes are in addition to federal taxes. The deduction just reduces your federal net income. Without it you pay federal taxes on a larger portion of your income.
State of Washington does not have an income tax. We are able to deduct our state sales taxes from federal income taxes.
For example, if my taxable income is $75,000 but I paid $10,000 in sales taxes, my effective federal tax basis is then $65,000.
The law is such that the feds cannot levy taxes on money that was ALREADY paid in taxes on a State level. Likewise, the state cannot tax money that was otherwise paid to the Federal tax collection.
You can be taxed twice on your earnings, but not taxed twice on what you PAID in taxes.
Short answer, no I don't think its realistic to say that a state could raise its own taxes so high, that they ice out the feds on tax collections.
However, the high tax states are getting their wealthy taxpayers subsidized by some percentage (maybe it works out to around 25%) by the feds. In general, I'm in favor of keeping the tax money closer to home...but not in this manner....to complicated and would be easier if the states did their own taxing in a vacuum, separate from the feds.
Your lost. Federal Income taxes are in addition to state taxes. States dont pay for military so sending money to Idaho in lieu of Feds wont fund the military.
think 2 separate customers selling you 2 separate products.
When states that seem to have been mismanaged and refused to cut spending they created state income tax. Then at some point, it looks like people were maybe growing in opposition, or possibly the original tax was sold as being temporary so deals must have been made to allow for the deductions off the federal return for some pacification.
Maybe I'm off base, but it looks like a transfer of revenues to me.
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