Comment by spikengineer | Hacker News Reader

Comment by spikengineer | Hacker News Reader

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In Most countries, the National legislature can restructure states, impose nationwide simplification of tax policy etc within the limits of the federal structure they have. US is one of the few countries the relationship is the other way around.

In most countries, the states get their power from the delegation of powers dictated by the union/federal constitution. In US, The union gets their power from the few matters that were delegated to them from the states.

For example, India used to have such disparity in consumption taxes (not income tax) which was recently removed and simplified. The federal govt collects all consumption and income taxes and devolves the receipts to states based on pre-defined formulae enshrined in law.

Edit: In an ideal world, instead of filing separate state and federal tax returns US should move to a common system where tax can be collected/enforced by one entity and the receipts devolved to states as per certain rules. This will remove income tax disparity between states and equalise business/opportunity costs (No more Delaware tax havens for companies to skirt taxation). This will simplify a lot of things. Most countries including mine have such a singular system.

The tax and income disparity between states is kind of the point. It's a real live AB testing of the tax code.

You just don't like it because it's clear that low tax is a better and more democratically supported policy.

The best test of this, the Kansas Experiment, was an unpopular failure.

https://en.wikipedia.org/wiki/Kansas_experiment

Exactly this! It’s the whole point of the United States.

If you don’t like the policies of a state enough, you can move to another one! It’s extremely rare that someone can move between regions with different laws if they don’t like the laws of their state. You get to choose your government by changing where you live, if you think one of the governments is wrong or bad somehow.

Sure, there are consequences. And inefficiencies. But if you’re French, you can’t just decide to live somewhere with different laws. It’s challenging to move to another country. Even though the EU has laws that make it easier to move and work in other countries, it’s nowhere near as easy as the USA. Forget it entirely if you live in a less progressive or allied country.

This forces the states of the USA to stay appealing - they compete with each other for population. This works because the Union of states allows people to leave if one becomes oppressive, else that state goes to war with the entire rest of the Union. So the states are forced to be accountable to each other and their people.

Each state is supposed to be independent for this reason, and it’s why I’m a big fan of limiting Federal government power and instead pushing changes at a state level

It's a race to the bottom.

I prefer a race to the bottom rather than a race to the top.

Playing cities and states off against each other for tax breaks and free money is very effective if you have the financial means.

The richest man in the world - Jeff Bezos - did exactly this to try and shift the taxation burden away from him and on to the rest of America with his HQ2 stunt.

This is indeed better for a limited class of people.

Are there any policy choices between those two extremes?

This would not be ideal because it would go against the very concept of the United States. It’s a union of states, full stop.

The federal government has the authority to appoint federal assessors to local property tax districts, to generate valuations for a national property taxation, and then share these updated valuations with state and local governments, which may then independently decide to use the same valuations for purposes of state and local taxation. It did so in order to collect the 1798 national property tax under John Adams and the three 1813-1816 national property taxes under James Madison.

The federal government also has the ability to regulate state and local taxes using the interstate commerce clause. After the provision in the Articles of Confederation limiting the federal government to collecting direct taxes in proportion to state land values was abandoned, the supporters of direct taxation influenced by the French Physiocrats lobbied for the interstate commerce clause in order to ban state and local governments from collecting excise and sales taxes on goods sold across state lines, so that state and local governments would be forced to rely more heavily on property tax.

I am neither an expert nor familiar with US constitutional law, but in most other countries the federal power trumps the power of any states/provinces and is not limited by a single clause and helps simplify and remove any disparities in taxation policy. As far as property taxes are concerned, most countries retain the policy to keep the local councils empowered to decide tax rates albeit "within the rate limits and fairness criteria imposed by the states and federal governments". In my country property taxes cannot be made zero/low or made exceptionally high by a showoff city council trying to get reelected for whatever reason as this causes unnecessary migration between cities/towns for no practical reason other than to skirt taxes with no practical systemic benefit to the populace at whole.

In the U.S. politicians were more concerned with the opposite, that low property taxes would be more likely to cause loss of population and emigration than high property taxes. At the time of the revolution the U.S. colonies were relying on revenue from land tax, property tax, property income tax, and public banking rather than sales tax and were rapidly growing in population due to immigration from European countries where most of the large landholders were exempt from property taxes. Early America had large quantities of land and few workers relative to Europe. In order to industrialize Franklin and founders associated with Democratic-Republican party thought it was first necessary to increase population and maximize rural agricultural productivity, which from reading the French economists they thought would be stimulated by some form of direct tax and hindered by indirect tax.

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