One thing’s for sure; that tax bill in Congress is going to hit higher-tax so-called “Blue” states harder, leaving their residents stuck with a bigger tax bill due to loss of state and local income tax deductions as well as property tax deductions after the first $10,000 (assuming it emerges from conference as is or substantially so).
New Jersey – already heavily taxed (Taxed Enough Already? – will feel the burn. As will California, Illinois, Connecticut, New York and Massachusetts (not for nothing is it called “Taxachusetts”).
So what will they do, in the face of residents potentially picking up stakes and heading for lower-tax states (Florida has no personal income tax and neither does Texas, which is probably capacious enough to accommodate a mass influx of whiny New Yawkers… hahahaha!) in order to avoid an increased tax burden?
Do they go supply sider and cut their own taxes in response, something anathema to the leadership in most of those states? Stay the course (thousand points of light, yada yada) and maintain the status quo? What?
Tax reform could hit certain high-tax states harder than others
I predict they stay the same or raise them to offset the reduced federal spending. The changes will actually be a tax reduction on the bottom 2/3 anyway since they the standard deduction increase will offset the loss of the deduction. And blue states don’t worry about over taxing the rich.
Since the states are no longer incentivized toward one type of taxation or another, any increases might be in areas that people normally didn’t deduct anyway.
I predict they stay the same or raise them to offset the reduced federal spending. The changes will actually be a tax reduction on the bottom 2/3 anyway since they the standard deduction increase will offset the loss of the deduction. And blue states don’t worry about over taxing the rich.
Since the states are no longer incentivized toward one type of taxation or another, any increases might be in areas that people normally didn’t deduct anyway.
I predict they stay the same or raise them to offset the reduced federal spending. The changes will actually be a tax reduction on the bottom 2/3 anyway since they the standard deduction increase will offset the loss of the deduction. And blue states don’t worry about over taxing the rich.
Since the states are no longer incentivized toward one type of taxation or another, any increases might be in areas that people normally didn’t deduct anyway.
But aren’t the high income tax states going to be de-incentivized to maintain the high income taxes? It’s a classic economics case. The states decisions to increase income taxes where being subsidized (in part) by Uncle Sam. That will no longer be the case. The richest 1/3 in these states don’t have anyone in State Congress they can talk to?
Sure, which is why I said they would raise revenue through other means than income taxes. But in blue states the rich get less say and some of the rich are even happy to pay more. Those that don’t like it move to Texas.
In actuality, total tax burden per capita doesn’t very too much state to state with red states averaging about 8.5% and blue around 10%. But red states usually have lower income per capital and spread the burden around while blue states screw the rich.
But the bottom line is blue states tend toward Keynesian policies and don’t see times of expansion as oppertunties to cut taxes but instead set money aside for “rainy day funds” that are used in downturns to fund infrastructure projects. Or that is the theory they use to sell the voters higher taxes to go to a general fund.
But the bottom line is blue states tend toward Keynesian policies and don’t see times of expansion as oppertunties to cut taxes but instead set money aside for “rainy day funds” that are used in downturns to fund infrastructure projects. Or that is the theory they use to sell the voters higher taxes to go to a general fund.
Yeah, it might be a sales job. The blue states generally set aside less money (as a % of total expenditures) than the red states – at least that’s what 2017 looks like.
So what will they do, in the face of residents potentially picking up stakes and heading for lower-tax states in order to avoid an increased tax burden?
The likelihood of blue states going supply-side (a la Kansas) is about the same as some folks re-evaluating the belief that all the wealthy folks are picking up stakes. In other words, extremely low. Outside of California, states will possibly transition to property taxes (away from state taxes). People who are in the most economically vital areas do so because economic opportunity is higher, in spite of taxation.
Sure, which is why I said they would raise revenue through other means than income taxes. But in blue states the rich get less say and some of the rich are even happy to pay more. Those that don’t like it move to Texas.
In actuality, total tax burden per capita doesn’t very too much state to state with red states averaging about 8.5% and blue around 10%. But red states usually have lower income per capital and spread the burden around while blue states screw the rich.
But the bottom line is blue states tend toward Keynesian policies and don’t see times of expansion as oppertunties to cut taxes but instead set money aside for “rainy day funds” that are used in downturns to fund infrastructure projects. Or that is the theory they use to sell the voters higher taxes to go to a general fund.
Several of them have unsustainable levels of public pension obligations and didn’t put aside near enough money in fat times to cover future outlays, whether they couldn’t by law or through just poor planning. California’s CalPers and Illinois’ pension system come immediately to mind. I think a lot of states, blue and red, made wildly optimistic assumptions about public pension plans’ return on investment for some time. Now it’s come back to bite them.
I think if you take California’s – and other states’ – cost of living, even in in-state boom economic times, such as you see in California, it’s become more difficult to live in in them. With COL factored in in California, it drops them from 6th-largest economy in the world to 12th.
This is not a slam on those states – because people are always free to move elsewhere if the primary concern is something like a high in-state tax burden (I know I would). I just think a lot of bad planning and a hesitance to be engage in good fiscal management is going to multiply the intensity of the loss of certain federal tax deductions for those below the “rich rich” level, who either don’t want or need their taxes lowered or who support and can fund higher taxes on their income.
Like you say, though: most states will probably pull that “hike all the fees and don’t refer to them as taxes” gag. Hopefully, they’re targeted intelligently when they are eventually raised. What are the chances of that happening, you think?
So what will they do, in the face of residents potentially picking up stakes and heading for lower-tax states in order to avoid an increased tax burden?
The likelihood of blue states going supply-side (a la Kansas) is about the same as some folks re-evaluating the belief that all the wealthy folks are picking up stakes. In other words, extremely low. Outside of California, states will possibly transition to property taxes (away from state taxes). People who are in the most economically vital areas do so because economic opportunity is higher, in spite of taxation.
Die-hard defender of the Blue Model to the end.
That’s okay, because I’ve lived in and owned homes in California. Hell of a state from a natural beauty standpoint. Run by a succession of fools and con men, from both parties, for decades, though.
Hopefully, it can also arrest its descent into Third World-ism, what with the huge numbers of homeless and the big hepatitis A outbreak going on down in San Diego.
San Diego opens giant tent to contain hepatitis outbreak - ABC News
One thing’s for sure; that tax bill in Congress is going to hit higher-tax so-called “Blue” states harder, leaving their residents stuck with a bigger tax bill due to loss of state and local income tax deductions as well as property tax deductions after the first $10,000 (assuming it emerges from conference as is or substantially so).
New Jersey – already heavily taxed (Taxed Enough Already? – will feel the burn. As will California, Illinois, Connecticut, New York and Massachusetts (not for nothing is it called “Taxachusetts”).
So what will they do, in the face of residents potentially picking up stakes and heading for lower-tax states (Florida has no personal income tax and neither does Texas, which is probably capacious enough to accommodate a mass influx of whiny New Yawkers… hahahaha!) in order to avoid an increased tax burden?
Do they go supply sider and cut their own taxes in response, something anathema to the leadership in most of those states? Stay the course (thousand points of light, yada yada) and maintain the status quo? What?
Tax reform could hit certain high-tax states harder than others
I would think the liberals or at least the ones who want to soak the rich will be ok with this. It doesn’t affect anyone who pays less than 10k in local taxes, right?
The US government has unsustainable levels of public obligations and didn’t put aside near enough money in fat times to cover future outlays, whether they couldn’t by law or through just poor planning.
This. It’s fine to have a right vs. left discussion. However, this one has been going on for decades, and it has become a right vs. reality issue. Could BK (or someone else) please honestly come to terms with the failure of the “blue state demise” talking point and explain why that hasn’t happened. Please, not just another “kicking the can down the road” argument, since the feds are kicking the can MUCH further than any state while spending more money propping up many red states.
One thing’s for sure; that tax bill in Congress is going to hit higher-tax so-called “Blue” states harder, leaving their residents stuck with a bigger tax bill due to loss of state and local income tax deductions as well as property tax deductions after the first $10,000 (assuming it emerges from conference as is or substantially so).
I don’t see any reason for state taxes to be a national deduction. In fact some of the reason those state taxes passed was because of the national deduction. Why wouldn’t those states want to pay your fair share?
Why wouldn’t those states want to pay your fair share?
Look up “double taxation.” There is a grand and glorious history of conservatives here in the LR arguing against the evils of it. Also, look up “states’ rights”. The deduction allowed states/localities greater flexibility in becoming shiny “laboratories of democracy” while simultaneously diminishing the fed’s reach. States were also less capable of running multi-trillion dollar ongoing debts (though some certainly have tried ;)… At this point conservatives are gladly handing greater power to the central government in a large number of areas. This is potentially a Faustian deal if (when) the party in power flips (or even if it stays the same).
– will feel the burn. As will California, Illinois, Connecticut, New York and Massachusetts (not for nothing is it called “Taxachusetts”).