Posted on 05/17/2018 4:17:01 PM PDT by re_tail20
Before the ink was dry on our new tax bill, outraged blue states were screaming about the cap on the deductibility of state and local taxes. Their governments were also frantically seeking ways around it, and small wonder. For decades, high-tax states with a lot of wealthy residents enjoyed a hefty subsidy from the rest of America. Legislators were understandably panicked over what voters might do when handed the rest of the bill.
That panic generated some desperate ideas. The most popular, currently, is allowing people to convert tax payments above the $10,000 cap into a "charitable donation." New York, New Jersey and Connecticut have already passed laws to allow this.
While charmingly innovative, this approach is likely to fall afoul of tax courts, as will the other proposed tactics. Blue-state taxpayers may finally have to confront the full cost of the government they want. And Democrats will finally have to confront the tension between what those voters want government to do and what they're willing to pay for.
That reckoning is long overdue.
Remember the Bush tax cuts, first passed in 2001? A heartless giveaway to the rich that did nothing for the middle class, Democrats said. But when their expiration date approached, President Barack Obama called for raising taxes only on families making more than $250,000 annually — that being, apparently, what it now takes to call yourself "rich."
This absurdity is no accident. It's a function of the ideological beliefs of the Democratic activist base clashing with the geographic and demographic distribution of their voters.
Over the past few decades, the United States has undergone "the Big Sort," the clumping of the electorate into demographically, professionally and politically homogeneous neighborhoods. Hillary Clinton voters have their ZIP codes, and Donald Trump voters theirs, and ever more rarely do...
(Excerpt) Read more at chicagotribune.com ...
We all pay more fed taxes to cover the shortage when they get go deduct their full state taxes.
“Either way, the millionaires and billionaires in California, Texas, Illinois, etc. etc. will now be paying their fare share of both state and federal taxes.”
They aren’t really the problem for the RATs. It’s the upper middle class professionals who, while a lot of them are “all in” for Socialism, haven’t been asked to pay their fair share. There are two income families here in CA that have combined incomes of from $200,000 to $300,000 (or more) who have been able to deduct tens of thousands of dollars in State Income, Property, and Sales Taxes from their Federal Returns. Now, with the limitation, they are going to be getting a rude awakening about the “true cost” of Marxism/Socialism! Just property taxes are going to be a bitch for them. Buy a new $2 million dollar home ( and a lot of them do) and they face a $20,000 tax bill at a minimum. So a $10k limitation means that they will owe federal tax on half of it.
>>>If this figure was $12,850 for “high-tax blue state” like New Jersey, or $13,800 for Connecticut, etc. — even WITH the state/local tax deduction in place — then how can you possibly claim that these states are being subsidized by “red” states like Alabama ($4,900), South Carolina ($4,700) or Mississippi ($3,900)?<<<
Under the Tax Bill, people can deduct up to $10,000 in State Taxes (Income / Property / Vehicle Registration).
The average Low Tax States Residents won’t even hit that number, while the average High Tax State Residents will.
In those High Tax States paying an average of $13,000, the first $10,000 is still Deductible, leaving them paying the Federal Tax Rate on $3,000.
If they ae in a 15% Tax Bracket, the new Law “costs” them an additional $450 in Federal Income Taxes. That is also offset by the Reduction in Federal Income Tax Rates across the board, which lowers their Federal Income Tax obligation.
If the Blue States really care about the Taxpayers who live there (LOL), they can simply lower their Tax Rates rather than blaming the new Tax Bill for their self inflicted problems.
Are they paying in accordance with the same tax rates and rules as the rest of the US? Yes, they are.
If they want all the government they're getting, let them pay for it. As you point out, they seem to have the money...
Food stamps are a FEDERAL program, while the numbers shown in that study seem to be based on STATE welfare spending. So the two sources we used for our information don't necessarily contradict each other.
Right. But go back to Post #40. Those states where people were able to deduct their full state taxes were paying a hell of a lot more in Federal taxes than other low-tax states already.
D.C. is a giant welfare “state” — but that’s almost by design. You can’t really compare it to other states because it isn’t a state itself, and has no state government. It’s designed to be heavily funded by the Federal government.
Under the 2017 tax reform law there is no 15% tax bracket. There are 12% and 22% brackets, and most of the taxpayers in those brackets wouldn’t be deducting their state taxes anyway because they would just take the (new) higher standard deduction instead.
They were before, too. What's the point?
And now they pay more STATE taxes(deductions cut) as well because of their drive for utopia. Each state must be accountable and responsible for their own STATE tax burden.
They’re not paying any more money in State taxes than they were before. Losing the Federal tax deduction on State taxes didn’t change anything in any State’s tax code.
Thanks for the article. Great stuff, and puts to rest some of the issues regarding so called welfare states of which SD is called one of the worst and according to charts is only marginally so.
The profound comment/truth that no state gets more in Federal Funding than what it contributes in Federal income taxes is a game changer if actually a true statement.
Bingo. To wit, property taxes, you know, the taxes that prove you do not own your property, because if you cannot pay them, the State will take your property to insure they are paid. Which in my mind says, U N C O N S T I T U T I O N A L or ought to be. So, is there a State with no income taxes and no property tax? Seems to me there are only seven States with no income tax so the research should be easy, SELF.
Good points.
The details of the numbers themselves are subject to a lot of questions and clarifications, but the general trends identified here are consistent with almost any similar study you read on the subject. Poor rural states and those with large Indian reservations and military bases tend to be the biggest "recipient" states when it comes to Federal taxes paid vs. Federal expenditures received, while wealthy urban/suburban states tend to be the biggest "donor" states. Maryland and Virginia are anomalies because a lot of their residents work for the Federal government in D.C. -- so they are much higher on the list than they would be otherwise.
LA Times article on tax reform bill
Who Subsidizes Whom? The State and Local Tax Deduction Compared with State Balances of Payments
Just for the heck of it, I posted the ranking of the states according to the "balance of payments" figures in the Rockefeller Institute study -- and color-coded them by the 2016 presidential election results.
1. New Mexico
2. West Virginia
3. Mississippi
4. Alabama
5. Virginia
6. Kentucky
7. Maryland
8. Hawaii
9. Maine
10. South Carolina
11. Arkansas
12. Alaska
13. Arizona
14. Missouri
15. North Carolina
16. Tennessee
17. Idaho
18. Montana
19. Vermont
20. Louisiana
21. Oklahoma
22. Georgia
23. Oregon
24. Ohio
25. Rhode Island
26. Delaware
27. Michigan
28. Florida
29. Indiana
30. Pennsylvania
31. Nevada
32. Iowa
33. Kansas
34. South Dakota
35. Utah
36. Wisconsin
37. Washington
38. Texas
39. Colorado
40. California
41. Nebraska
42. Wyoming
43. New Hampshire
44. Minnesota
45. Illinois
46. North Dakota
47. Massachusetts
48. New York
49. Connecticut
50. New Jersey
Well they certainly lost the subsidy from other states to pick up their state tax burden.
I would find that statement hard to believe. Individual and corporate income taxes account for less than 60% of the Federal government's revenue, so it seems unlikely on its face that this statement could be true.
See the list of states in Post #97. These are ranked on a per-capita basis according to the net balance of Federal taxes paid vs. Federal dollars spent in each state. The higher a state is on the list, the more it gets from the Federal government in spending compared to the Federal taxes paid by your citizens.
According to that source, every state ranked from #1 through #37 actually pays less in Federal taxes than it receives in Federal expenditures. So 13 states, in effect, are subsidizing the other 37 -- and 9 of those 13 are high-tax "blue" states.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.