High-tax states are losing people, money and seats in Congress

https://www.wsj.com/articles/blue-state-redistribution-11578443075

by ash • 6 years ago

55 56 6 years ago

microdrum• 6 years ago

As they should be. California has perhaps gone as far as it can go, and one wonders when the rubber band is going to snap back so that the place becomes friendlier to workers and business.

seibelj3• 6 years ago

If you have a very small percent of your population pay an ever increasing share of the tax burden, it’s quite easy for them to avoid it (move to Florida). This problem has hit NY and Connecticut especially hard. Here is a story from 2016 of how a single resident moving from New Jersey put the entire state’s budget at risk https://www.nytimes.com/2016/05/01/business/one-top-taxpayer...

The truth is that if you want to dramatically increase taxes collected, you need a broad-based tax that hits the middle class. But the middle class hates taxes as much as everyone else! And therein lies the problem for politicians. They can continue to bash the rich, but when push comes to shove soaking them won’t solve the problem. Seizing all of Bill Gates money will only fund the federal deficit (over $1 trillion this year alone) for a few months. And then what to do?

One enormous, immoral handout to the middle class is the mortgage interest tax deduction and the fixed-rate 30 year mortgage which are simply subsidized handouts to people well-off enough to purchase property. People have come to think this is a right, when in reality all taxpayers are handing over money to those rich enough to purchase property. Only the USA has the fixed-rate mortgage because it’s bad business for banks. Eliminating this would be a much more economically logical way to increase the tax take than soaking the rich, but I guarantee there is 0% chance of this happening because, again, no one likes paying taxes!

Ididntdothis• 6 years ago

A lot of the long term deficits came from tax cuts mainly for upper incomes. I don’t see why those couldn’t be reverted. The whole line “bashing the rich” doesn’t make sense to me. They had it really good over the last few decades compared to most other citizens.

mcny2• 6 years ago

If you have a very small percent of your population pay an ever increasing share of the tax burden, it’s quite easy for them to avoid it (move to Florida).

This is why I like the idea of a federal property tax and a federal VAT. Sure, these taxes are not exactly progressive but couple high taxes with generous rebates (my own proposed name-pending housing allowance to soften the super high annual seven percent of property value federal property tax) in addition to the already well known freedom dividend (USD 1000 per month universal basic income) by one of the Presidential candidates. Taxation at the state or local level can't work. If we enshrine interstate commerce, we cannot allow capital/wealth to pit communities against one another. Look at Kansas City, Missouri. It is ridiculous that it has to keep offering lower taxes for businesses to not move across state line to Kansas (because Kansas City, Kansas keeps offering lower taxes). State and local governments are NOT sovereign and we must take away taxation from them for their own good.

Canada apparently has a carbon tax that gives people money back so as long as your carbon footprint isn't too much, you don't pay a lot in additional taxes.

foogazi5• 6 years ago

This is why I like the idea of a federal property tax and a federal VAT

Was just thinking how horrible this would be - there would be no escape.

chronotis• 6 years ago

You used to be able to deduct _all_ interest expenses, including things like car loan and credit card interest. They removed those deductions back in the '80s but kept the home mortgage deduction as lots of small businesses dual-purpose their property for working and living in.

Fully repealing the mortgage interest deduction would, at this point, recover ~$25B/year, or a little over 2% of the current annual deficit. I suspect the political cost to touching the MID again is much higher than the fiscal benefit to the deficit.

fred_is_fred• 6 years ago

The MID was already quite well touched, groped actually, with the last tax cuts. Much less people use it because the standard deduction was raised so significantly that very few itemize anymore.

seattle_spring3• 6 years ago

I'm so confused. Why is it immoral to have tax cuts to provide shelter for the middle class, but not immoral to have tax cuts so the rich can have 3 megayachts instead of 2?

seibelj3• 6 years ago

Why is it moral to allow the poorest taxpayers to subsidize property-owner tax deductions?

cryptica2• 6 years ago

Taxes don't make sense in a fiat system where the government could just print as much money as it needs anyway. Income tax hurts income earners, not asset holders.

The system should not incentivize people to own more assets, it should incentivize them to produce more value.

With the right regulatory framework and good separation of institutions, it would be much more efficient for the government to just print the money it needs directly.

I don't buy the argument that this would cause capital flight. The government has many tools at their disposal to prevent that. It doesn't matter in the long term if rich people dump all their stocks all at once and move overseas; that would create significant opportunities for smaller local investors to replace them because most of the value-producing companies are on the ground; the infrastructure and the workers cannot be moved easily and that's where the real value is.

plutonicks• 6 years ago

Interesting argument and its true that income taxes hurt production and producers.

My biggest challenge with the idea of governments printing the money they need is that there would be no accountability. It is reasonably apparent that governments are not accountable enough for their actions.

i.e. why would they only stop at what they need when they could print 1M and give it to everyone or people who vote for them. And when that 1M is worthless, print another 10M for everyone.

As imperfect as the tax system is there is still a theoretical trace of accountability. Budgets need to be paid through taxes, taxes impact people, people vote for governments, governments create budgets.

I think we need to move towards a system with MORE accountability, less wasteful spending and less deferred debt. Interestingly enough this probably means broadening the tax base, where both rich and poor pay more of the share of total tax. Only then will people have "buy in" to the government and the desire to hold them to account

tzs• 6 years ago

Taxes don't make sense in a fiat system where the government could just print as much money as it needs anyway

There was an interesting discussion of this is a book my income tax professor in law school recommended to those who were interesting in the theoretical and philosophical issues of tax systems.

The usual argument against the government printing money is that it causes inflation.

Suppose, for example, you have a $1 000 000 000 000 in circulation. Each dollar is worth 1/1 000 000 000 000 of the value of the total economy.

If the government prints, say, $52 631 578 947 dollars, there is then $1 052 631 578 947 in circulation, each dollar now worth 1/1 052 631 578 947 of the total economy, and the government having 52 631 578 947 of those dollars, giving the government 52 631 578 947/1 052 631 578 947 of the economy, or 5% of economy.

In many ways this is very similar to a 5% flat tax, except there is no need for taxpayers to file returns, no need for complex regulations about what is or is not taxable income, and you can't evade it by keeping your transactions off the record.

From an individual point of view, losing 5% of my purchasing power to inflation isn't really worse than losing 5% of my purchasing power to taxation.

Inflation has another problem, though. As the value of a dollar, as a percent of the total economy, keeps going down, people need more and more of them to get the same things. We'd have to be frequently changing prices, changing pay, and changing everything else that is denoted in dollars.

That was probably a bigger problem in the past, and will be a smaller problem in the future. As more and more transactions go entirely electronic, we could probably internally do everything in some sort of pseudo-dollar that's pegged to a fixed fraction of the total economy or something like that that the electronic systems convert automatically to current dollars on the fly. So you go to the store to buy bread, which the store internally priced using pseudo-dollars, and the electronic price display tag under bread on the shelf converts that 2020 dollars and displays that.

apta• 6 years ago

immoral handout to the middle class is the mortgage interest tax deduction

Quite ironic because it's interest itself that is extremely immoral and parasitic.

foogazi5• 6 years ago

Only the USA has the fixed-rate mortgage because it’s bad business for banks.

The US is not the only country with fixed rate loans

You can get a variable rate loan if you are “rich enough” to buy a house

no one likes paying taxes!

Agreed

throw0101a2• 6 years ago

In case of paywall:

* https://archive.is/Mra7Q

andreareina2• 6 years ago

Why am I getting served a cloudflare cert, and getting a 403 from cloudflare[1]?

[1] http://prntscr.com/qt3tl0

dzmien• 6 years ago

https://community.cloudflare.com/t/archive-is-error-1001/182...

throw0101a2• 6 years ago

shrug Works for me on Safari/macOS. I regularly use archive.is and have never had a problem with it. Is your connection being intercepted in some way?

$ host archive.is

archive.is has address 46.45.185.48

I tried using outline.com, but WSJ isn't supported by them.

ykevinator• 6 years ago

It's a little flimsy to ascribe causality in the headline

Ericson2314• 6 years ago

If they said "high cost of living" they would be a lot less wrong.

I would expect the vast majority of people moving to lower expenditures to be paying far more in rent than taxes, and saving far more (in absolute terms) post move in rent than taxes.

JumpCrisscross2• 6 years ago

Anecdotally, there is a link. SALT caps were the last straw for many high-income former New Yorkers.

If you travel a lot for work and pleasure, it isn’t difficult to fall below the residency thresholds. You’re still paying tax for the time spent in e.g. New York or California. But the other income can be shifted to a lower-tax jurisdiction.

I’m staying in New York. But there is a limit at which the tradeoff is worth it.

bradleyjg2• 6 years ago

If you travel a lot for work and pleasure, it isn’t difficult to fall below the residency thresholds. You’re still paying tax for the time spent in e.g. New York or California. But the other income can be shifted to a lower-tax jurisdiction.

It's freeloading. Their lifestyles are possible because of high paying jobs in cities that invest to create conditions where such jobs can exist at all. (Same for the vaunted high paid remote workers.) They benefit from those investments but do not wish to contribute. This kind of defect cycle eventually leads to killing the goose that's laying the golden eggs.

rayiner• 6 years ago

Relevant: https://www.chicagotribune.com/opinion/commentary/ct-millenn...

When tax rates are not explicit, millennials say they'd prefer larger government offering more services (54 percent) to smaller government offering fewer services (43 percent). However when larger government offering more services is described as requiring high taxes, support flips and 57 percent of millennials opt for smaller government with fewer services and low taxes, while 41 percent prefer large government.

harikb• 6 years ago

People who do these stats should see where the investment is for people who left.

1. Are they moving to Florida to take advantage of a tax shelter alone or have they also sold off any NY/California real estate. That is, people move for strategic reasons even if they believe in California/NY

2. Young people vs Retirement - retiring to Florida is not a new thing.

3. Wouldn’t you want old people to move away from high cost cities so young can move in?

option• 6 years ago

A lot of middle class families with kids move out. Bad public schools despite huge taxes is not great for those raising their kids.

js22• 6 years ago

This opinion piece overstates its case. NC has a flat 5.25% income tax. Alaska has no income tax. Yet NC is growing and Alaska shrinking. There’s a lot more going on with where people choose to live than just tax rates.

The Economist did a special report last year comparing Texas and California, looking at a lot more than just tax rates. They are the two largest states facing many similar problems with very different approaches.

https://www.economist.com/leaders/2019/06/20/texafornia-drea...

https://www.economist.com/special-report/2019/06/20/californ...

zaroth2• 6 years ago

What does NC have to do with it? In any case, income tax is just one part of the total state tax burden, often overshadowed by property tax.

Over the last decade New York has lost more of its population to other states (7.2%) than any other save Alaska (8%), followed by Illinois (6.8%), Connecticut (5.6%) and New Jersey (5.5%).

js22• 6 years ago

The piece makes the argument that state income taxes are causing people to leave. It used NC as an example of a state that’s growing. Yet NC has a state income tax higher than some of the states that are shrinking.

Yes there are other taxes, but the piece focuses entirely on income tax. My point is that there are many factors in where people choose to live, of which cost of living is only a single factor, but this piece lazily focuses solely on a single component of cost of living. It’s thus easy to invalidate its argument that income taxes are what’s causing people to leave.

Spooky232• 6 years ago

New York taxes have always been high and if anything have stabilized.

There are two New Yorks... the NYC Metro and the rest. NYC has adapted, although it is not as diversified as it was. As for the rest, de-industrialization left devastation in the upstate cities, and now whole regions of upstate are depopulating as trade, agricultural and military policies change.

North Carolina is relevant because you can move there and live with marginal skills for now. Taxes aren’t really that low, and will jump as the needs of the population get factored in.

Spooky232• 6 years ago

It’s the WSJ, so you always have to price that into anything they say, particularly in the post-Murdoch era.

There are definitely more jobs in the south driving young people migration. Taxes get attention because republicans love talking about them, but it’s mostly bunk. I know when my parents were considering moving to SC, the property taxes were an initial draw, but when you factor HOA and food sales tax, the savings weren’t as big as initially thought.

The secret to the growth is all about business taxes and regulations. As a business owner, you just won’t get away with things in “high tax” states that you will in the others.

getpolarized• 6 years ago

Just moved from CA to CO. 7.25 to 4.6 ... Not a massive change mind you but I'll take it.

The main problem with CA are the "hidden" taxes WRT quality of life. Real estate prices being insane. Serious homeless problems in SF. Smoke from all the fires. PG&E being evil, etc.

klipt2• 6 years ago

Ironically the high California real estate prices are partly due to low (property) taxes from Prop 13. Much like low mortgage rates, they make real estate more attractive as an investment and help inflate prices.

Texas has much higher property taxes but much more affordable housing. Which runs counter to most people's ideas of red states always having lower taxes than blue states.

originldirgibl• 6 years ago

Texas also has no income tax.

foogazi5• 6 years ago

Austin median home price is around 400k and without prop 13

einpoklum• 6 years ago

1. No state in the US has politically powerful unions, public or private. They're mostly in the employers' pockets and keep making concession after concession. Not to mention being in the pocket of the democratic party, for years already; and failing to participate in solidarity struggles by one union for another; and essentially shutting down their own strikes despite the members' sentiments, etc. etc.

2. Very few data points, no trends over time, no examination of other causes of population flows etc.

My conclusion: This is a pro-corporate propaganda piece: They want low/no taxes and an even more maleable and precarious workforce.

Sounds like standard pro-corporate propaganda.

moomin• 6 years ago

Indeed, if there’s such an exodus, why isn’t real estate in California cheap?

awb• 6 years ago

The population can grow from kids bring born and growing up in CA.

If the housing supply doesn't match the internal population growth you can have an exodus and an increase in housing prices.

gotoeleven• 6 years ago

Could it be people simply responding to incentives which causes them to move? Nah, it's pro-corporate propaganda that's giving the proletariat false consciousness.

tatersolid• 6 years ago

Illinois has very powerful unions that have driven the state into insane total tax burden and near-brankruotcy. Even on the ritzy North Shore of Chicago the real estate prices are below 2008 levels as businesses, jobs, and normal people flee the state.

jandrewrogers2• 6 years ago

One of the most direct examples of this for the HN demographic is the migration of tech workers from San Francisco to Seattle, which has similar wages but no income taxes and no capital gains taxes. That saves tens of thousands of dollars per year on income tax alone. It isn't a secret that of the two big factors incentivizing people to move to Seattle from San Francisco, one of them is the substantially reduced tax incidence (the other factor being quality of life).

There is definitely a threshold where people start arbitraging tax differences between States, though it doesn't happen often because demographic and lifestyle preference dimensions also factor heavily. The partial de-correlation between tax policy and predominant demographics/lifestyle in recent years, combined with relentless tax increases in some jurisdictions, has created an environment ripe for tax arbitrage.

crystaldev2• 6 years ago

As a non-vampire, I have to laugh at "quality of life." You can't use those tax savings, or any amount of money for that matter, to buy a clear day in January. Not to mention the wildly different personalities cultivated by each climate.

jandrewrogers2• 6 years ago

Most of the great cities of northern Europe have winter climate that is similar to or worse than Seattle, and many are at higher latitudes. So yes, if you solely define "quality of life" as "lots of winter sun", you will find yourself disagreeing with most popular benchmarks for quality of life.

existencebox• 6 years ago

Please excuse what would otherwise be a glib comment, only writing this because I peeked out my window (seattle) and got a good chuckle out of your making this statement on the one day I can make this joke:

It's fine; we don't need money to buy a clear day in January, just for someone on the internet to assert we don't have any for nature to go "Oh no they didn't."

(full disclosure it is a little cloudy but the sun is definitely out, and it's gorgeous.)

High-tax states are losing people, money and seats in Congress

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