Can state taxes make up for lost Federal funding?

[Salaman2]

My question is...can the Constitutional power granted to the 50 States help maintain the 'States Rights' of citizens and essential Government programs?

Thus, for example, for every Federal tax cut to the rich (yes, it needs to be defined), the 'States-of-the-Willing' (we call them blue) will increase State taxes for the rich proportionally. Surely not ideal, but perhaps a short term fix to the current populist bent. How many poor folks in Michigan and Pennsylvania would complain if the riches of their neighbors paid higher State taxes to help poor folks to get by, given lack of Federal assistance? Same with education, higher property taxes on the rich, and so on. The end results?....nothing worse than a Federal theocracy...plus all the rich folks move to Red States and help raise them up economically.

 

[Grinkle]

Pretty much all governments in the US can levy taxes as they see fit - Federal, State, County, City.

https://www.hrblock.com/tax-center/irs/tax-brackets-and-rates/highest-lowest-taxed-states/

Here is a list of the states with the highest taxes and the tax rates.

• California (13.3%)
• Hawaii (11%)
• New Jersey (10.75%)
• Oregon (9.9%)
• Minnesota (9.85%)
• District of Columbia (8.95%)
• New York (8.82%)
• Vermont (8.75%)
• Iowa (8.53%)
• Wisconsin (7.65%)

As you can see, its a pretty blue list.

Yes, states can and do have state level income tax and they can set their own tax rates based on income. Not all states have an income tax, but all states need to raise revenue and levy taxes in some way.

In Texas for example there is no state income tax but there is a roughly 1.7% property tax, which for most homeowners is effectively a wealth tax, since for most homeowners the majority of their net worth is their home. But if you ask Texans if they would support a wealth tax I think you'd find basically zero support for it and at the same time you'll find broad support for high property taxes in lieu of a state income tax. Maybe I'm alone in seeing it that way, or maybe I'm just overthinking it.

increase State taxes for the rich proportionally

So yes, this could be done. If a state lost federal funding, it could choose to attempt to replace that funding by raising state taxes, on their wealthier residents if they chose to.

 

[EricDMMiller]

Or just borrow and run a deficit the way every government everywhere does anything these days.

 

[placebo]

Or just borrow and run a deficit the way every government everywhere does anything these days.

Apparently a lot of states aren't allowed to.

Can State and Local Governments in the US Run Fiscal Deficits?

Discover why most state and local governments do not – or cannot – run fiscal deficits in the same manner as the U.S. federal government.

www.investopedia.com

 

[placebo]

One big complication is that the federal government currently transfers wealth from blue states, which tend to be rich, to red states, which tend to be poor. Red states need federal support the most, yet they can least afford to make up a decrease in federal support.

 

[gleem]

One big complication is that the federal government currently transfers wealth from blue states, which tend to be rich, to red states, which tend to be poor. Red states need federal support the most, yet they can least afford to make up a decrease in federal support.

Yet it is the red states responsible for Trump's election.

 

[Grinkle]

for every Federal tax cut to the rich

The OP's question was around relative tax burden.

they can least afford to make up a decrease in federal support.

I completely agree. That said reduction across the board of federal services is a different issue than what the OP raised I think.

To me, the idea of states taxing the rich if the Feds do not is an interesting one, and blue states have a lot of wealthy folks. I found the number of billionaires per state on Wikipedia and pasted the list below.

List of U.S. states by the number of billionaires - Wikipedia

en.wikipedia.org

Florida and Texas are the red state leaders but the blue states have the lions share of billionaires to tax.

If states do increase the tax burden on their wealthiest people, then perhaps -

plus all the rich folks move to Red States and help raise them up economically.

Interesting to think about, and clearly from the below table there is a very long tail of states without the ability raise much revenue this way (edit to finish my thought) so they wouldn't be inclined to raise taxes on their 1 or 2 billionaires and might attract more.


California 186
New York 135
Florida 97
Texas 73
Illinois 23
Massachusetts 22
Georgia 18
Pennsylvania 18
Nevada 17
Connecticut 13
Washington 13
Colorado 12
District of Columbia (DC) 11
Maryland 11
Tennessee 11
Arizona 11
Michigan 11
Oklahoma 8
Wisconsin 7
Missouri 7
Virginia 7
Ohio 7
Wyoming 6
Arkansas 6
Utah 6
North Carolina 6
New Jersey 5
Montana 4
Minnesota 4
Nebraska 3
Oregon 3
Indiana 3
Hawaii 2
Mississippi 2
Kansas 2
South Dakota 1
Rhode Island 1
Maine 1
Idaho 1
Iowa 1
Kentucky 1
Louisiana 1
Alabama 1
South Carolina 1

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