Federal funds distribution

anonymous asked:

New York, Illinois and California have multi-millionaires that have been writing off their state taxes forever... they will no longer get that, this will cost them dearly. We will no longer be subsidizing those states, they will be paying themselves. The GOP tax plan is really going to help the poor, doubling the standard deduction, keeping the earned income credit and the child credit. You would have to make $60,000 as a family of four to pay any tax at all in under the new plan. I love it.




Welp, that’s an interesting definition of the word “subsidize” you’ve got there. As you clearly understand, the federal income tax is progressive, meaning that the more you make the higher percentage of your income you pay.

Overall, states like NY, Illinois and California are net tax loss states viz the federal government. In other words, the citizens of these states pay much more in taxes to the federal government than the federal government spends in programs in those states. Meanwhile, “conservative” states like Mississippi and Arizona are net gain states: they receive more federal government spending than their citizens pay in taxes.

The reasons are many. States like NY, Illinois and California are, for example, comparatively rich. They have large, productive cities in which most of the economic activity of the United States is generated. (Texas is likewise a net loss state even given its conservative political bias.) Meanwhile, Mississippi is poor. And since you can’t get taxes from turnips, states with big cities pay lots of taxes.

Meanwhile, states like Florida, SC and Arizona have large retired populations and large military presences, thus increasing how much those states receive in federal spending. Also, being poor, they have substantial welfare rolls as a percentage of their population. Illinois and NY have comparatively little of either.

All of which is an elaborate way of saying, “subsidy” is relative, and depends on what measures you use.

Meanwhile, what is profoundly clear is that the Republican tax bill radically cuts programs used by less well off people, is clearly a set up to rationalize further social program cuts on the basis of deficit claims, and tilts the tax system towards those who make their income through investments rather than earnings. In other words, toward people already well off enough to live on their  investments. AKA, rich people.

So, go right on and love the tax bill. But unless you’re already pretty well off, it’s only going to make inequality and inopportunity worse in this country.

Source
http://politicalprof.tumblr.com/post/168789680983/new-york-illinois-and-california-have