Like to bring this up when we talk taxes: I think it's totally crazy that we give the feds 25% or more and our states soo soo sooooo much less. I think it should be the other way around:
5% for the feds, and maybe 20% to the states. The reason is that our cities are filled with bums, and have absolutely no money to either give them jobs or make new programs. The feds don't give a shit and are busy making missiles or creating massive social programs that enrich the wrong people. I think the current strategy is broken. The other nice thing about this, is that we'd pay less in taxes AND the states/cities would be able to handle every damn thing it needs. It would be like 2x to 3x the money they are getting right now.
When people who are fans of the "Scandinavian model" in the U.S. try and hype it up, this is what they seldom understand (or at least publicly recommend).
In Sweden, until you hit ~$65,000 in yearly income, all of the taxes you pay on income (which is a relatively high rate) goes to your local government. Only after that point, your extra income goes to the federal government. [1]
This model cuts out the immensely large federal government which serves as a middle-man for distributing the income you contribute to your local community, while simultaneously sucking out so much of it— either siphoning it to federal causes, or people's salaries chipping away at it as it's sloshed around.
It's much more efficient when the majority of your income taxes support your local community directly. In the U.S. right now, these localities rely on property taxes, which is _much_ smaller of an income stream. People supporting the Scandinavian model should understand that this is necessary, and that's even more true when your country is larger.
[1] https://www.nordisketax.net/main.asp?url=files/sve/eng/i07.a... Heard this point from Swedish family and having trouble finding it online, but the typical municipality income tax is 29-34% and corresponds to equivalent tax deductions from federal taxation, which seems to effectively have the same (or near same) result.
Is there some kind of balancing which prevents the nice areas (i.e. containing more affluent people) from becoming really nice, and the poorer areas becoming worse?
There isn’t explicitly, and I know that’s part of what the federal top-down model tries to prevent, but is it really working? The United States’ affluent areas are night-and-day to the poor ones.
If we think about the per-capita income in poorer areas of the States, and what can be taxed off of that, it seems like it’s still enough for that community to function.
The current U.S. model seems to result in everyone getting a much smaller pie, even if the government manages to change the portions of who gets what.
This is actually a huge lever of control for the federal government, and I think has contributed greatly to increase of federal power over the states. The reason being that states can tap into that large federal stream... If they meet the federal criteria. This kind of carrot system is actually how many federal laws that seem to effect the states work. For instance, no state was ever mandated to implement the No Child Left Behind act. They just wouldn't get federal education funding if they didn't... Transportation is another area where this is pretty common.
Yeah, like did you know that 18 is the legal drinking age in the US? That's why 18 year old soldiers can drink alcohol in the military. BUT, if a state increases the drinking age to 21 in their state then they get sweet sweet federal highway funds. For a long time Louisiana was a holdout, so 18-21 year olds would go there to party for mardis gras, and the road quality showed it.
Yeah, but then we'd just be dominated by states like Minnesota, California, Delaware, New York, etc. Basically, ginormous pools of money would start to build in the old Union and out on the west coast. But almost everyone in the middle would be hosed. (I mean places like Oklahoma and Colorado would likely be pretty happy, but everyone else would take substantial financial hits.)
> Yeah, but then we'd just be dominated by states like Minnesota, California, Delaware, New York, etc. Basically, ginormous pools of money would start to build in the old Union and out on the west coast. But almost everyone in the middle would be hosed.
Not really. States like California are net payers, but only just, because they have large diverse populations and end up getting back almost all of what they pay in.
It's true that a lot of the middle states are net recipients, but most of them are still below $4000 per capita.
And the bigger problem is that so much of the money is wasted. Each Congressman goes to Washington to bring back pork, and they do, but pork is inefficient. So they bring back $10,000 per capita in funding after paying in $6000, but only $5000 of the $10,000 is put to productive use. Does that really help the states compared to just keeping their original $6000 and using all of it productively because you don't have to negotiate with 49 other states for how to spend your own money?
I think you have an incorrect understanding of pork barrel spending. Of that $10,000 that you put into the government. $6000 go to social security/medicare. $2,000 to military+veterans. Then another $600 to debt. And the remaining $1,400 goes to education/food+ agro/education/transportation/housing/science/energy/internal affairs. I don't know how much of that is pork barrel spending but I doubt it's more than a couple of hundred.
You're using national average math, not net-recipient state math. It's rarely the case that states that receive more than they pay do so as a result of social security. It would also be pretty hard for a state's net receipts to be interest on the debt absent some kind of sovereign wealth fund that held US treasuries, which most US states don't have.
Moreover, the military budget is where a sizable chunk of the pork lives.
And the problem isn't just pork, it's the general inefficiency of hoovering up your state's money and then sending it back with strings attached. Federal programs can require hot garbage like designated "affordable housing" (i.e. cordoning off a slum to concentrate poverty in) as a condition for housing grants, or "teach to the test" education programs like NCLB. It's not a stretch to claim that the states could be better off with less money but without the strings attached.
Sure it can, when the "simple transfers" have qualifiers that induce unfunded inefficiency and other externalized costs.
If you have to spend five hours a month to prove that you qualify for a program that pays $80/month when your labor is worth $10/hour, you're not receiving net $80/month, you're receiving net $30/month and then getting paid to labor for five hours, the second of which you could have done for any other employer using the same five hours, so the value of the program is $30/month even though it costs $80/month to the taxpayer. Plus whatever administrative costs exist on the government's side. And then whatever value the alternative employer would have derived from having a worker available to work those extra hours.
It's even possible for programs to have negative value. They can cost money and then destroy more value than that. A lot of housing and other subsides can do this, e.g. you give some people $500/month for housing, but that only causes local rents to increase by $150/month -- on everyone, including the people not eligible for the subsidy. So on paper you have a thousand people receiving $500/month and you think you've gained $500,000, but then you account for the five thousand people who now pay $150/month more, cost of $750,000, and you're net -$250,000. Meanwhile the taxpayer still had to pay $500,000 to make that happen.
I know in theory you can spend money that destroys value. You don't even need to rely on weird supply/demand curves, you could just pay for bomber jets to literally firebomb a city.
But realistically how could Montana get an 80% increase in efficiency while providing similar services to the federal government?
And according to normal economics textbooks increasing market rent isn't destroying value. If more people move to a city which drives up demand and rent. Economists don't think of that as value destruction. In classic economics textbooks the value destruction caused by subsidized rent is that some people will spend $1000 on rent that they would never rent without the subsidy because they only get $800 of value from it + the dead weight loss of the taxes that funded that subsidy.
> But realistically how could Montana get an 80% increase in efficiency while providing similar services to the federal government?
By removing all the strings. The problem with the existing federal programs is that they're numerous, complex and individually small, which is the recipe for inefficiency. That results in high administrative costs -- not only for the government but also for the recipients, and only the first cost is actually accounted for in the government budget, even though the second is much larger. Because government agencies do their tasks as a full time job but the recipients are novices who have to amortize the cost of learning and using the system over only their individual use of it. Again, suppose someone has to spend five hours a month to navigate a program that pays $80/month. Then if their labor is worth $10/hour, just their side of the transaction contains $50/month worth of inefficiency.
Even the fact that housing grants have to be spent on housing is inefficient, because it distorts the market for the thing being subsidized:
> And according to normal economics textbooks increasing market rent isn't destroying value. If more people move to a city which drives up demand and rent. Economists don't think of that as value destruction. In classic economics textbooks the value destruction caused by subsidized rent is that some people will spend $1000 on rent that they would never rent without the subsidy because they only get $800 of value from it + the dead weight loss of the taxes that funded that subsidy.
But this isn't caused by more people moving to the city, it's caused by the people who already live there getting a bunch of money they're only allowed to spend on rent. Then some of them would prefer to have fewer roommates or a bigger apartment, so they try to use the money for that, which requires the people who would otherwise live in those other apartments to have to outbid them, causing everyone to have to pay higher rents on the same apartments.
Meanwhile the rent increase goes to landlords who typically remove it from the local economy, either because the building isn't owned by a local to begin with, or because the owner is a wealthy person who then invests the money in index funds etc. which transfers ~98% of it out of the state. So the value isn't "destroyed" but it immediately leaves the state, which from the state's perspective is basically equivalent.
The whole point of allowing people to deduct their state tax payments was to solve exactly this problem. Let the states that want to tax more and provide more social services do so without harm to their citizens.
Of course that deduction is gone now, which just further solidifies government power.
My own suspicion is that we got rid of that because government wants to harm the citizens of certain states. That's likely one of the benefits of having federal power, the ability structure the system to perpetuate your hold on it. In the US, our politicians do this all the time.
Well, there are actually good arguments to be made on both sides of the issue. For example, one argument is, "why should people who live in high cost states pay less federal tax for the same federal services?" The counter-argument being "they don't need as many government services since they get the same benefits from their state" and also "their incomes are higher so their total dollar contribution is still just as high".
It's a tough issue. From the Federal perspective is makes a lot of sense to get rid of the SALT deductions, and I suspect the next time the Dems are in charge they will "be unable" to restore the deduction for "reasons", since both parties want the extra revenue.
My alternative suspicion is that SALT harms smaller and poorer states, since they can't lower local taxes to attract large businesses without also raising those businesses' federal taxes.
The state tax payments were a deduction, not a credit. So even before the recent SALT limitation raising state taxes would "harm" your state's citizens in the sense that you used "harm".
As an example, if your federal marginal rate were 25%, paying $4k in state taxes would only get you $1k off your federal taxes, not $4k.
Not sure how states taxing more don't harm their own citizens. If I make $100, with 30% federal tax, then I keep $70. If my state raises their tax from 0% to 20%, then I pay $20 to the state, deduct that from my $100 to get $80, and pay $30 on that which is $24. So I keep $56.
IIRC New York City actually has higher rates of housing/sheltering homeless than most other cities in the USA. However, due to population size + density it would still be possible to see the homeless people who refuse/cannot access housing fairly regularly if one lives in or commutes to the densest areas. (For example, I've only ever seen homeless people in the heart of manhattan. I commute to Astoria and Flushing and long island fairly often and hardly ever/never see homeless people there.)
That is a perspective from somebody living in a place with state income tax. Life is so much better when you are not paying state income taxes. Texas, Florida, and a few other places have no state income taxes.
Your reply is to a post that is talking about taxes generally, not income taxes specifically. Texas has no income tax, but has sales[0] and property[1] taxes that are above the national average, as well as tolls on many public[2] roads. Texans are heavily taxed, but in ways which are based on overall footprint/usage rather than the ham-fisted distribution of income taxes that other states prefer. I agree with your assertion that life is better because of that.
who are the "wrong people" that massive social programs enrich? Can you give an example? Most of federal spending is medicare, medicaid and social security; which are immensely popular with voters of all kind.
> who are the "wrong people" that massive social programs enrich? Can you give an example? Most of federal spending is medicare, medicaid and social security; which are immensely popular with voters of all kind.
If you ask people if they support the abstract idea of having a military so we're not invaded by foreign forces, or having a program to prevent the elderly from dying in the streets, they say yes.
But then you ask them whether social security should send a larger check to a retired Jeff Bezos than a retired firefighter on a fixed income, or the government should spend billions of dollars on equipment the military itself says it doesn't need but the Congressman from the district which is getting the contract to build it says that it does, and the public support for that falls off pretty fast.
And those "features" cause those programs to cost hundreds of billions of dollars more than they need to, which money could otherwise go to infrastructure and schools and tax cuts for the middle class, all of which are also immensely popular with voters of all kinds. But won't happen when the programs absorbing more than three quarters of the total budget are administered in a federal system where the Congressmen are rewarded for bringing home the pork and Florida is an important swing state full of retirees.
Military is like 15% of federal spending, social security and healthcare is 50+% of federal spending.
I agree that there is military excess, but I'm skeptical that reducing it would make THAT much difference.
The military used to be a significantly larger percentage of the budget than it is now, but it's not because the military is any smaller. It's because spending on retirees is exploding. Nobody really wants to admit this because the reason the costs are exploding is that there are so many more people over retirement age, which also means that there are more voters over retirement age, which makes it politically very difficult to do anything about it. But it's a serious problem -- how are we supposed to sustain spending more than half of the government budget on retirees?
And the DoD and the VA are also considered separately, but let's not pretend they're unrelated. If you have twice as many soldiers today then you need twice the VA budget tomorrow.
>Most of federal spending is medicare, medicaid and social security...
Well, there's also Defense, and then service payments on the debt. Those are the big 3 without question. So "the wrong people" must be in there somewhere?
But the real reason we give more to the feds is because if we didn't it would be AWESOME for places like New York, Minnesota, Texas, Delaware, California etc, and TERRIBLE for places like Wisconsin, Alabama, South Carolina, and Florida.
That second group of states is half states in the black belt. Those state governments are bought and paid for and their people largely disenfranchised, same for much of Appalachia. (Like, c'mon, Mississippi is around 40% African American, you really think them electing Donald Trump reflects the true will of the people? Of course not!) They're run by shitty rich people with shitty agendas who are just out to further enrich themselves and have a vested interest in maintaining the power structures that be. That's why the South "votes against its own interests." It's literally a narrative invented by the coal industry so it could justify and get away with brutalizing West Virginia and leaving it far worse off than it was before. Coal owns WV all the way down to the school boards and sherrifs.
The reason for this is that if one state has better social programs then another and higher taxes the poorest are going to move there, and the high earners are going to move away.
This doesn't seem to be a major problem for the EU, which has unrestricted internal migration but social programs are administered by the individual member states.
The idea that the poor will mass migrate to California and the rich will mass migrate to South Dakota is pretty unrealistic. The poor can't afford to live in California even with social assistance, and the rich don't want to live in South Dakota no matter how low the taxes are.
Because money buys stuff taxpayers want. Middle class people want good schools and functioning transit and to know they're going to have a secure retirement. The premise of having the government do these things is that they can do them at least as well as the market. If they succeed they'll have no trouble attracting people to come there and pay taxes in exchange for receiving those services. If they fail and are then out-competed by other states that do better, whether by leaving things to the market or otherwise, isn't that a good thing? It requires the underperforming states to improve or lose population.
> This doesn't seem to be a major problem for the EU, which has unrestricted internal migration but social programs are administered by the individual member states
I might be off the mark here, but from my understanding wasn't unrestricted migration one of the big drivers behind Brexit? Or at least the idea that the "poor countries" were "taking advantage" of the "rich countries"?
A lot of the drivers behind Brexit have a tenuous relationship to facts. There are some legitimate reasons to leave, but there are also self-interested parties telling people the lies they want to be told. And "mistaken people believe this" is no support for a position.
The thing about rich people moving to places with lower taxes and poor people moving to places with more services is that it's the sort of thing that seems intuitively obvious until you actually think about it, and you realize it's like arguing that lakes are impossible because water evaporates.
It's not that water doesn't evaporate. It's not that poor people don't prefer more services and rich people don't prefer lower taxes. It's that everything is not one dimensional and there are other factors that outweigh that one by enough that the lake is still full of water.
My understanding is that unrestricted immigration has the opposite effect: rich countries taking advantage of poor ones, via “brain drain”. That’s why the average age of medicine doctors in Poland seems to be around 50: all the younger ones went to Germany or Scandinavia.
It’s true for blue collar workers as well: try hiring a contractor to remodel your house and then watch them leave the job unfinished because they got a better paying gig in UK (that actually happened to a friend of mine)
Both is true. There is brain drain as well as welfare migration. My hometown in Germany with a population of ~300k now has ~11k migrants from Romania und Bulgaria. Aside from various social problems this is also a big strain on the social systems. 85%+ of households are dependent on child support checks.
There's also the fact that Western European countries desperately need immigration for covering future pensions. Countries like Germany and Finland are the next to follow Japan's crippling issues with aging population and poor dependency ratio.
The studies I have seen referenced suggest that EU migrants to the UK are generally net contributors as they pay their taxes like everyone else but tend to travel here without dependents, be younger and eventually go home before they are too old. Migrants from outside of the UK on the other hand tend to be older and come with families so tend to be a net drain on services.
Leaving the EU will mean more migrants from outside of the EU - so will actually cause the situation a lot of Leavers were worrying about to get a lot worse.
That's taking about external migration (refugees and illegal immigrants), not internal migration under the EU's freedom of movement. Of course, the latter was a major factor in the Brexit referendum, so I wouldn't say it's not a major problem for the EU...
What's even the point of the distinction if the EU is not adequately restricting immigration from those other countries? The point remains the same: people from poor countries are mass migrating to rich countries with the most social programs. This is a major problem for the EU.
The point of distinction is that EU internal immigration and the refugee situation are entirely different things. Refugees leave there home countries because of war and terror. Members of the UN are obligated [1] to give shelter to those people.
Inside the EU there is indeed some welfare migration. This is however not only driven by social systems but also by available jobs.
Those high earners will screw up the economy of their destination state accidentally gutting the lower middle class, institute social programs to deal with the all the problems this creates, realized they just created the same dystopia they fled and move again.
It's like a perverse form of rolling upgrades.
You can see this process in action in places like CO and the PNW states which are starting to flip from "rich people move here" to "poor people move here". TX will probably start flipping soon.
Major urban areas with lots of job opportunity seem vacuum up the wealthy regardless of the state wide trend (no matter how bad NY state gets upper middle class people in search of a lucrative career will be moving to NYC). I'm not sure how that plays into things.
