Alabama Guys

[StuBleedsBlue2]

If all states had the economic equivalent of NYC your point would be spot on.. its not the case however...

The argument is relevant for a taker vs giver state. I selected NY because they went through the process that was easily accessible to the data and the detailed explanations.

This topic diverted on a Alabama vs Illinois debate. It wouldn't take much to extrapolate the data and apply similar, but less extreme variances with Illnois vs New York. Let's just assume for a minute, though, that NY is the ONLY state for which this is the case. Should the people of NY either demand more federal funds or expect a return on their investment?

I believe that it is fair for states that are in a position like NY to share or spread the wealth, so I focus more on the latter. States that are recipients, such as Alabama, have a responsibility to show that those subsidies that fund their state and local governments have an effect, so when you continue to see Alabama rank near or at the bottom of basically every single quality of life category, obviously there isn't that positive ROI. Change may be good, that's all that I'm saying.

I've been accused of being condescending, which is a joke. I'm just being realistic. As much as someone might not like be replied to in a perceived condescending manner, I don't like to be presented with a con, so I'm going to state the facts. It's sad to see that people continue to believe the con, when in reality every taxpayer has the option to take a deduction that has a similar effect. They have the choice.

I guess I could really stir the pot and talk about how blue states also subsidize their votes in Presidential elections too, but maybe I'll just leave it at taxes for now and try to gain a consensus on facts first. It's a human nature thing to let perceptions override facts and it's too prevalent in an extremely toxic political environment and used by both parties to galvanize support, but it shouldn't stand in the way of facts and if I can do anything to not let that happen, I will.

[StuBleedsBlue2]

Hardly a subsidy. You are mixing Corporate tax dollars with personal taxes. Take corporate taxes out of the mix and what does it mean to individuals? Corporations taxed at 35% doesn’t mix with individual tax brackets. I have yet to see where any individuals in New York subsidize anyone. New York Corporation have operations throughout the country, but only pay their taxes from their New York base. The report proves nothing relative to the discussion.

Let's pick up on the corporate tax subject for a minute. I'm starting to think that you're at least conceding that corporate tax dollars can serve as a subsidy to smaller states, so let's just make an assumption that is the sole provider to the redistribution of federal dollars.

When the rates will be come from 35% to 21%, where do you think that initial sting is going to hurt first? It's going to hit the states that are the greatest disparities of giving vs taking. You think NY is going widen the disparity gap? Ain't happening.

Now, I know the whole theory is predicated around there will be growth to offset the cost of the tax cuts, which by the way never happens, but let's just assume that it does. Who are the immediate beneficiaries of that? Well, it's corporations and the investor class. What's the first thing corporations do with that money? They don't invest in jobs, across the board pay increases or anything else, they usually invest in themselves. Stock buy backs. So, if you're a shareholder you're going to do really well.

I know people want to talk about their 401k's, but those are just paper gains right now. Unless you're cashing out, you're not a winner today. So, all those participants, I'm excluding from the conversation. So now back to Alabama, I wonder how they rank among participation in investments? I'm going to guess pretty low, at least relative to those "high state tax" states. So, the first winners of this tax plan will proportionately benefit those in other states outside of Alabama.

Let's talk about if the growth doesn't happen as predicted. Where will costs be cut? It'll happen across the board, but it's impact will be greater on the disparate states between giving and taking. If every dollar in yields 3 to 4 dollars back to you state, every dollar less paid in will have the same impact of 3 to 4 dollars not returned. The states on the negative end of that disparity will make sure that happens.

So, with a state like Alabama being near last in line for the reward and near the front of the line for the risk, is it all worth it? Add to the fact that the tax benefit those folks will receive in Alabama will be shared across every state that neutralizes any added benefit to Alabama taxpayers.

You might be tempted to throw the SALT deduction back in my face and say that with a capping of those deductions is the real benefit to taxpayers in Alabama, well, not really. By raising the standard deductions, it's going to dramatically reduce the need for people to itemize. That theory of low tax states subsidizing high tax states is completely dependent upon whether people itemize or not. So maybe instead of 70% people taking the standard deduction, we're up to say 90%? I'm certainly a candidate for making that switch(although it's not going to change my tax preparation and the supporters of this bill say it should do, why would I not want to compare which is going to save me money?).

If that number of itemizers approaches a 10% figure of all tax payers, there's so much in this bill that will benefit them, especially the permanency of the tax cuts which the middle and lower class will not enjoy(again disproportianately affecting Alabamans), I would think that the 10% is fully part of the investment class that will be the first in line to be rewarded and the last one to assume the risk.

Is the risk worth the reward?

[Catonahottinroof]

There’s a reason why the states who have the highest taxes back to the fed do so...they have the higher revenue sources to tax. The ecomonic engines per state are not equal, or even static one to another.

https://en.m.wikipedia.org/wiki/List...f_billionaires
https://en.m.wikipedia.org/wiki/List..._states_by_GDP

[KeithKSR]

This is such an 11th grade explanation and it was exactly what I was expecting to get. You're missing most of the story, and it's still an argument that Republicans want you to buy.

First and foremost is that you're only looking at one side of the equation. So we'll start with that first. First of all, over 70% of filers don't itemize deductions, so it's not an issue at all. If you aren't itemizing you're not subsidizing. The next flaw in your argument is that you're confusing a credit with a deduction. The only tax benefit from paying state taxes and itemizing those deductions is what your marginal tax rate is. Not 50% as you have suggested. Finally, the tax laws says you can deduct state OR sales tax. The 3 states that you have singled out, Texas, Florida and Tennessee have sales tax of 6%, 6.25% and 9.75%. So, if you spend most of what you can make, you can take a deduction too, even without a state having a state tax rate. In Illinois, each year, I take the greater of my state taxes paid or my sales taxes paid. It's been different year over year. Even if your state has a zero state tax, you have the sales tax. So people in those states have EXACTLY the SAME benefit as states that have high state taxes.

So, for that point alone, if you feel like you're subsidizing high tax states, then that's your fault. Start saving those receipts and take the deduction that is allowed.

Now, let's look at the other side of the equation. Let's talk about what these states, including Alabama gets.

Florida: >$4 of federal dollars received vs taxes paid
Texas: around $1.25
Tennessee: around $1.75
Alabama: around $3.5
Kentucky: around $2.3

Illinois: around $.70
California: around $.90
New York: around $.70

So, what do you get for your "supposed subsidy" of higher tax states? Multiples of federal dollars in return, where the states that actually pay the most get less than $1 in return. How do you think these states make up the difference? I'll tell you, higher state taxes. The people that should be the most angry in this deal are people that don't itemize in these high state tax states. They're the ones getting screwed.

For those folks that think they're subsidizing and don't think they're getting anything from these other states, here's 3 things for you:

1. You're flat out wrong
2. Ask your state government why you're not getting benefits from federal tax dollars
3. Hire an accountant, save those receipts and claim your deduction

If people want to complain, I'd gladly support any plan that requires states to receive no more than what they contribute, but you know what will happen there? States will have to start taxing people, but hey you can take that deduction then. Oh, but you have that option now.

If you were correct their would be no issue of eliminating the state and local tax deductions, but you aren't and this is why those states are opposed to eliminating the ability to deduct the cost of their state and local taxes.

[KeithKSR]

There’s a reason why the states who have the highest taxes back to the fed do so...they have the higher revenue sources to tax. The ecomonic engines per state are not equal, or even static one to another.

https://en.m.wikipedia.org/wiki/List...f_billionaires
https://en.m.wikipedia.org/wiki/List..._states_by_GDP

The example he gave of New York has a large number of corporate tax payers, which boosts the per capita amount of taxes paid substantially.