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Thread: You’re Better Off in a State With a Higher Income Tax

  1. #41
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    Quote Originally Posted by Neomalthusian View Post
    State governments have to tax, and they have to tax because they have to provide for health, education, infrastructure, and other services. State governments have service requirements. They have to do things. And to do things takes money, and they can't create their own money. So they must tax.

    What this means is that the ideologically anti-tax crowd is asking its state government to pull one over on them. They're saying to their government, hide the cost of government from me
    The question is only one of degree and the problem isn't that the anti-tax folks are asking the government to hide the costs from them. The problem is that the government is demanding more and more from them, to do the same damn thing.

    So when they raise the gas tax by $.23 per gallon because all of a sudden they need more money to repair the roads. Yeah, sorry, I'm going to question that when I hear about cops making 250k per year sitting on their ass on the GWB

  2. #42
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    Quote Originally Posted by publius3 View Post
    DJ is atypical, the tens of millions of people who need 500k, 750k, 1m+ in liquid assets who clearly can't attain their dreams making 75k are not an exception, but I digress, because that obviously wasn't a segue to further argumentation now, was it?
    It actually was. I find it difficult to respond when you granulate things down to the sentence level.

    I don't think you're responding to my actual arguments, which are based on research about how people experience wealth. You are assuming that human desires are about wealth. They aren't. Wealthy people simply are not any happier than people with fewer assets. The poor are less happy than people who have sufficient assets to be comfortable. What you're observing here is that wealth CREATES desires as much as it satisfies them. I doubt Derek Jeter wanted to be the owner of a baseball team as a kid. But now he has all this money and nothing useful/interesting/fun to do with it--so he needs a new desire that's out of his range. It's the challenge perhaps, but not the having that matters. If Jeter did manage to buy the Marlins, how long would that make him happy? A year? And then he'd need a new goal to strive for--winning the WS perhaps. And then? Winning two. And then? Winning it every year. There are no limits to our desires. They are never fulfilled. That's the lie that wealth tells: "some day, if you have enough of me, you'll be happy."

    Which is why I think it's okay to have high tax rates for wealthy people--they don't experience money the same way those with less do. It doesn't make them happy. Your arguments here don't really speak to that point--you just make a bunch of assumptions about people you don't even know.
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  3. #43
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    The happiness isn't in accruing wealth, its in accomplishing difficult to do things. By the end of 2018 I will have a Planet Fitness in TN. It will not produce income that will change my living standard one iota. The value of the franchise itself will not make me happy at all. But when on opening day I am going to be extremely happy, very happy at the accomplishment.

    "high tax rates for wealthy people"

    But there's a consequence and that consequence is that the taxed funds go to the government instead of invested by the person taxed. I don't care what world you live in, the tax can't NOT have negative implications for investment. Beyond which taxes are such that they are the number 1 expense for the vast majority of red voters. In my case, when I still owned the business, in the highly taxed NJ, exceeding 50%, and if your marginal utility argument had any real merit, I really should be ho-hum indifferent about that. But I'm not, and neither are the people whose #1 expense is taxes either. The government is taking too much and asking too much from me; and consistently taking 'just a little bit more.' Trust me, its not the Russians dividing us.
    Last edited by publius3; 29th October 2017 at 02:31 PM.

  4. #44
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    Quote Originally Posted by publius3 View Post
    The question is only one of degree and the problem isn't that the anti-tax folks are asking the government to hide the costs from them. The problem is that the government is demanding more and more from them, to do the same damn thing.
    My state has by some measures the nation's worst-funded public pension. If the state were to say "we need to raise taxes to address our pension crisis," taxpayers would say "over my dead body," and if the state said "okay, well then we'll have to use the Permanent Fund," they'd again say "over my dead body," and if they said "okay, well then we will have to cut pension benefits," they'd say "over my dead body." So the state says "okay, then we'll charge 22 cents for every dollar of state and municipal government payroll," and the taxpayers say "Huh? Ok, whatever." The taxpayer is paying for this pension problem one way or another. If the way they pay for it is in the form of a tax, they hit the streets in protest. If it's tucked into some confusing formula dealt with through municipal payroll, they're oblivious. No one other than taxpayers is somehow forking it over to shore up this profound pension liability. The residents will absorb it.

    So when they raise the gas tax by $.23 per gallon because all of a sudden they need more money to repair the roads. Yeah, sorry, I'm going to question that when I hear about cops making 250k per year sitting on their ass on the GWB
    This is why I think conservatives need to stop being blanket anti-tax and blanket anti-government and start getting specific about the problem. Fine-tooth comb the collective bargaining agreements.
    Last edited by Neomalthusian; 29th October 2017 at 03:16 PM.

  5. #45
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    Quote Originally Posted by publius3 View Post
    The happiness isn't in accruing wealth, its in accomplishing difficult to do things. By the end of 2018 I will have a Planet Fitness in TN. It will not produce income that will change my living standard one iota. The value of the franchise itself will not make me happy at all. But when on opening day I am going to be extremely happy, very happy at the accomplishment.

    "high tax rates for wealthy people"

    But there's a consequence and that consequence is that the taxed funds go to the government instead of invested by the person taxed. I don't care what world you live in, the tax can't NOT have negative implications for investment. Beyond which taxes are such that they are the number 1 expense for the vast majority of red voters. In my case, when I still owned the business, in the highly taxed NJ, exceeding 50%, and if your marginal utility argument had any real merit, I really should be ho-hum indifferent about that. But I'm not, and neither are the people whose #1 expense is taxes either. The government is taking too much and asking too much from me; and consistently taking 'just a little bit more.' Trust me, its not the Russians dividing us.
    I think the negative consequences for investment are overstated. People will always invest in things they BELIEVE IN and are COMMITTED TO. Your argument appears to be that this is what drives investment.

    But I think that's not true. The portion of investment that is retarded by taxation is the portion that seeks only the highest return on investment, where return on investment--not building something meaningful--is the object. This gets back to the point I made earlier about corporate culture. Today, getting the highest possible return is the primary--the only--objective. The point of investment isn't to create something that's important to you but to make as much money as possible. We can see the result in places like Walmart. Sam Walton had a vision of a better retail space for rural America, and he built it. He invested in his employees, who were partly paid in stock. This is a worthy business vision. His children, on the other hand, are interested only in money, and the huge drop in Walmart's reputation coincides with their taking over the company and changing its ethos from vision-driven to entirely profit-driven.

    I think our tax code should encourage people like yourself, who want to build something meaningful. I think it SHOULDN'T advantage simply amassing wealth. It appears to me that in our current era, we have a lot more of the latter than the former. When 400 families control 62% of the wealth, I think we should be more concerned about the dreams of the other 330 million people who have only 38%. You and are are both on the same side of that divide--and so is everyone else who bothers to read this forum, I suspect.
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  6. #46
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    Quote Originally Posted by Neomalthusian View Post
    What this means is that the ideologically anti-tax crowd is asking its state government to pull one over on them. They're saying to their government, hide the cost of government from me, I don't want to have awareness of how you're screwing me. The state government has to tax and it will tax one way or another. If the state's taxpayers fiercely oppose, say, an income tax to provide needed revenue, they'll pay for it in some other way. Through crumbling infrastructure, pitiful support to political subdivisions (municipalities), non-competitive education, taxes on consumption or property or industry, or something else. There are service responsibilities that must be funded and will be funded. The voters rallying around an anti-tax candidate or proposition will not prevent the state paying for these services and responsibilities.
    But don't states have wide latitude in terms of the quantity, quality, and types of services they provide? It isn't just a matter of which way to tax, but how much. Some states provide more and better services. Some states have less-funded schools and worse services of all kinds. Often wealthy taxpayers choose to provide services to themselves privately, which is much less expensive than paying taxes to provide better services to everyone. It's okay for your public schools to suck if you send your kids to private schools, for example. It's easy to think denying services to people with disabilities (my particular jag) is justice if you don't know any.

    So states have choices about how MUCH they provide in terms of services because often their biggest tax payers don't think those services are important anyway. And they are free to feel that way because they can provide those services for themselves, should they need them. And why should they have to pay for anyone else? There are a few exceptions to this--roads are rough or smooth for everyone--but they are exceptions rather than rules.

    I think refusing to allow the exemption for state taxes encourages wealthy people who pay most of the taxes to leave high-tax states, thus creating its own kind of "death spiral" and encouraging states to provide less services. Let's all be like Alabama. Of course, Alabama already gets a wealth transfer from California and New York and this move will make that situation worse.

  7. #47
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    Quote Originally Posted by Rasselas View Post
    But don't states have wide latitude in terms of the quantity, quality, and types of services they provide? It isn't just a matter of which way to tax, but how much. Some states provide more and better services. Some states have less-funded schools and worse services of all kinds. Often wealthy taxpayers choose to provide services to themselves privately, which is much less expensive than paying taxes to provide better services to everyone. It's okay for your public schools to suck if you send your kids to private schools, for example. It's easy to think denying services to people with disabilities (my particular jag) is justice if you don't know any.
    States aren't really engaging in purely optional services just for the heck of it. Most states can't hack back their services without either directly increasing the burden at the local level (i.e. for infrastructure, facilities, public safety, et cetera), or otherwise creating other problems that have social costs. If state and local governments are really being wasteful, public backlash needs to target the exact type of waste going on, specifically, not just clamor for depriving their own government of funds generally based on sweeping generalizations about government being bad. If your current government is being terrible with money and decisions, simply starving it does not necessarily fix those problems. In some cases it leaves weaker protections and tools to do the job better.

    I think refusing to allow the exemption for state taxes encourages wealthy people who pay most of the taxes to leave high-tax states, thus creating its own kind of "death spiral" and encouraging states to provide less services. Let's all be like Alabama. Of course, Alabama already gets a wealth transfer from California and New York and this move will make that situation worse.
    Wealthy people don't generally like crappy services. The people who want to build their own private compounds separated from all public services are the rare ones. The relatively well-off and wealthy might want to get out of overgrown, overly costly places but in those lower-cost places where they want to move, services will improve as economic conditions do, which will happen when money starts landing in these lower-cost places, even in places like Alabama.

  8. #48
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    Quote Originally Posted by Neomalthusian View Post
    States aren't really engaging in purely optional services just for the heck of it. Most states can't hack back their services without either directly increasing the burden at the local level (i.e. for infrastructure, facilities, public safety, et cetera), or otherwise creating other problems that have social costs. If state and local governments are really being wasteful, public backlash needs to target the exact type of waste going on, specifically, not just clamor for depriving their own government of funds generally based on sweeping generalizations about government being bad. If your current government is being terrible with money and decisions, simply starving it does not necessarily fix those problems. In some cases it leaves weaker protections and tools to do the job better.
    The the problems with this argument seem myriad to me.

    1. There is a huge difference between the spending of various states--some states spend at much as 3x as much as others (and I'm leaving out Alaska as an outlier here). That doesn't suggest that some level of spending is necessary--it's largely arbitrary, based on taxpayer desires and needs. Yes, once programs are in place, it's hard to remove them, but there are different models of governance, and people in the various states can choose between them.

    2. I don't think that anyone can really tell what "wastefulness" is most of the time. How can taxpayers know if government is being efficient or not? What they see is the services provided and what they cost. They have no idea about efficiencies. They do know what programs they benefit from and those that others benefit from. So programs that benefit very few are likely to be seen as wasteful. In fact, any spending that doesn't benefit me directly is wasteful. It doesn't benefit me so it's unneeded. This is the most basic, selfish reaction--and so it is the most basic human reaction.

    Wealthy people don't generally like crappy services. The people who want to build their own private compounds separated from all public services are the rare ones.
    From what I know of human beings, they'll insist on good services that they actually use, but they'll be happy with crappy services that they don't use. In places like Alabama, it's normal to maintain some of the worst schools in the country, because only poor and black children go to them. Taxes are low enough that wealthy parents can pay for schooling on their own. That's the model, in fact. (That model traces back to colonial times, where the availability of low-cost education was directly proportional to latitude.)
    The relatively well-off and wealthy might want to get out of overgrown, overly costly places but in those lower-cost places where they want to move, services will improve as economic conditions do, which will happen when money starts landing in these lower-cost places, even in places like Alabama.
    How is Alabama a model? Their schools still suck. Their welfare services are among the worst in the country.

  9. #49
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    Quote Originally Posted by Rasselas View Post
    I think the negative consequences for investment are overstated.
    How do you reconcile that thought with your thoughts on the reduction in the ability to deduct 401(k) contributions?

    Quote Originally Posted by Rasselas View Post
    The real key is this paragraph, also from the OP: We already have a low savings rate, and most people don't save enough to make their retirement comfortable. Taxing these contributions for most people will mean smaller contributions.
    I agree with your conclusion there by the way.

    Quote Originally Posted by Rasselas View Post
    People will always invest in things they BELIEVE IN and are COMMITTED TO. Your argument appears to be that this is what drives investment.
    And there's still financial reality. I just don't believe in the idea, I believe it will generate post-tax rates of return that warrant the risk.

    Quote Originally Posted by Rasselas View Post
    The portion of investment that is retarded by taxation is the portion that seeks only the highest return on investment
    Taxation is allocative. That's the point of it no less. The opportunity cost is very real. The military budget expresses so well because it fits ever so neatly into the guns/butter paradigm.

    Quote Originally Posted by Rasselas View Post
    I think our tax code should encourage people like yourself, who want to build something meaningful. I think it SHOULDN'T advantage simply amassing wealth.
    You realize that I was treated far better than Walmart, right? An LLC or an S Corp are pass thru entities. I pay 0% at the 'corporate level' -- I could absolutely elect to be treated exactly like Walmart and form a C Corporation. I would NEVER do such a thing, that would just make my tax situation WORSE.

  10. #50
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    Quote Originally Posted by Rasselas View Post
    I think refusing to allow the exemption for state taxes encourages wealthy people who pay most of the taxes to leave high-tax states, thus creating its own kind of "death spiral" and encouraging states to provide less services.
    The AMT is already doing that though.

    "Adjustments for individuals

    Individuals are not allowed certain deductions in computing AMT that are allowed for regular tax.[8] No deduction is allowed for personal exemptions or for the standard deduction. The phase-out of itemized deductions does not apply. No deduction is allowed for state, local, or foreign income or property taxes. A recovery of such taxes is excluded from AMTI. No deduction is allowed for most miscellaneous itemized deductions.

    Medical expenses are deductible for AMT only to the extent they exceed 10% of adjusted gross income (this is not unique to AMT, it applies to regular income tax as well).[43]

    Interest expense deductions for individuals may be adjusted.[44] Generally, interest paid on debt used to acquire, construct, or improve the individual's principal or second residence is unaffected. This includes interest resulting from refinancing such debt. In addition, investment interest expense is deductible for AMT only to the extent of adjusted net investment income. Other non-business interest is generally not deductible for AMT.

    An adjustment is also made for qualified incentive stock options and stock received under employee stock purchase plans.[45] In both cases, the employee must recognize income for AMT purposes on the bargain or compensation element, the employer is granted a deduction for this, and the employee has basis in the shares received.

    Circulation and research expenses must be capitalized and amortized."

    https://en.wikipedia.org/wiki/Altern...or_individuals

    Right now 70% of filers taking the standard get a higher standard.

    Anybody itemizing less than 24k, now gets 24k.

    The class hurt are those currently itemizing more than 24k who now won't be able to. But if those people are in the AMT, who cares? So I have to woner what % of people itemize more than 24k but have incomes under the AMT thresholds. I don't know the answer to that.

    And all of it remains subject to the actual rate brackets in question.
    Last edited by publius3; 29th October 2017 at 07:37 PM.

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