Saturday, December 29, 2012

A Deduction We Can All Live Without

Did you know there are a few states with no individual income tax? Of course you did. Some states avoid taxes because they're big tourist destinations and generate a lot of revenue from that. Alaska because they have oil revenue. Washington State has a "business and occupation tax" so Microsoft and Boeing pays everybody's tax I guess. Some states even have constitution restrictions on income tax. And then, there are states like mine that tax the living hell out of their citizens.

But one benefit in states like mine is we get a deduction for our states taxes on our federal returns. Now think about this. If citizen x in a high tax state pays 10k in state (and local) tax, and that is deducted from their federal tax liability, then folks in low or no tax states have to pay more and are thereby subsidizing state governments in high tax states.

National Review did a study on the elimination of this tax and found it would increase federal revenues $800 billion over ten years. Not enough money to get us out of trouble but hey, it's a start. Low income folks would pay less than 100 bucks more but the 250k and over bunch would pay over 5k more. But there's a problem. According to the NY Times "The seven states that account for 90 percent of state and local tax deductions (including sales and property taxes) —(are) New York, New Jersey, California, Pennsylvania, Maryland, Illinois and Massachusetts." Hmmmm? The deduction, according to the Times is a way for Washington to support the states that do the most to support their "most vulnerable citizens and neediest cities." Neediest cities? I'm not quite sure what that means but it sounds very Detroit-ish.

I would love to see the elimination of this deduction because it requires rich liberals to put their money where their mouth is. They voted Democrat time and again. They supported this crazy profligate spending time and again. Now it's time to pay up.

So do I think it will happen? HELL NO!

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