Originally Posted by
StuBleedsBlue2
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.
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