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Comment by tolmasky | Hacker News Reader

> "Republicans felt that residents of the least socially protective states should not indirectly fund the welfare state and the spending implemented by Democrats in the coastal states."

Perhaps they "felt" that way, but the reality is that tax money generally flows from these coastal states to the red states. If anything, one could argue that SALT was a tool to help balance that out.

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Tax money flows that way because blue states are home to more wealthy citizens than red states, which are home to poorer citizens. Federal social programs tend to do just that, what a shocker. What SALT did was to give those wealthy citizens in blue states a tax break on their state's social programs and replace those funds with federal tax dollars coming from others.

There are plenty of poor people in these “wealthy” states. It’s not all just wealthy people that live in California, what a shocker. There are 40M people in California, I wouldn’t be surprised if there were more poor people in absolute terms in California than, say, Mississippi with a total population of less than 3M. The “state welfare” programs that are for some reason maligned (whereas Federal welfare programs aren’t for some reason) largely go to help poor people in these states. That’s my point about balancing: I’m not saying either is necessarily good or bad, both are trying to theoretically help people in need. SALT allows CA more wiggle room to help it’s own poor given that it is net negative on Federal money out vs. in (in part because people think that that somehow magically means everyone is fine there).

The difference is that California's state programs are there because California voters approved of them, more or less. California also has representation when it comes to federal programs. However, the states from which federal tax dollars subsidize California state programs through the SALT deduction do not have representation when it comes to California's state programs.

Those states however have disproportionate representation in both the House and Senate. So it’s not as simple as one having a say and the other not. Additionally, SALT isn’t exclusive to CA, any state with income taxes benefits from it (and most states do have income taxes). I think if you were to zoom out to the country level in a hypothetical international tax sharing scheme, where the voting mechanics were similar to the Senate and House, you’d probably flip sides, thinking of course it makes sense that a country should have some flexibility to protect its revenue (while still for the record delivering the highest contribution) vs. having a vote that isn’t really representative of its population nor contribution to some international tax pool. Because again, even without SALT, these states were often still providing the largest contributions, and often paying the highest taxes. This was fairly obviously a vindictive move here, that passed in the same bill that had massive wealthy tax cuts. It’s not like this money was now “finally able to get to the poor citizens of wherever” or something.

> Additionally, SALT isn’t exclusive to CA, any state with income taxes benefits from it (and most states do have income taxes)

Many states have income tax, but prioritize low taxes and spending. Those states don't see as much benefit from the SALT deduction. And make no mistake, when it comes to SALT, the real winners are the wealthy, not the poor.

> when it comes to SALT, the real winners are the wealthy, not the poor.

Right, which is why it happened parallel to the wealthy tax cuts. This "protected" that constituency from the effects of removing SALT (plenty of high earners in CA still ended up ahead if I recall correctly), went largely to offset other tax cuts (meaning no meaningful "programs benefits"), and thus ironically enough arguably negatively affected the middle class beneficiaries the most -- the kind of people that would have most benefited during specific rare events, for example when selling their home.

>Perhaps they "felt" that way, but the reality is that tax money generally flows from these coastal states to the red states.

Not true.

First, the state of California (to use as example) does not pay a cent to another state or to the federal government. It is residents of California that pay federal taxes, which in turn provide funding and services to states and individuals.

Second; the Rockefeller Institute (<https://rockinst.org/issue-areas/fiscal-analysis/balance-of-...>) shows that, as of 2018 (the last time I checked this data; I see that 2019 is now available), the 10 states at the bottom of the per capita list—that is, the states that benefit from the most federal spending per person compared to how much each person pays in federal taxes—are

2016/2020 Hillary/Biden-voting states: VA, NM, MD, HI, 1/2 of ME

2016/2020 Trump-voting states: KY, AK, AL, WV, MS, 1/2 of ME

It's not so much "blue states" as frequently claimed, but taxpayers of four very wealthy Northeast states (the Tri-State area plus Massachusetts) that account for the vast bulk of citizens paying more than they receive from the federal government. After them come CO, NE, UT, and MN, of which half voted for Hillary/Biden and half for Trump. All other states are net beneficiaries of the taxpayers in the top eight (and, again, really, it's the top four).

Do you have some data on how much tax money actually flows from coastal states to red states?

This data comes from the Rockefeller Institute of Government's semi-annual Balance of Payments studies, which they've been doing for some years. See, e.g., https://rockinst.org/issue-area/balance-of-payments-2022/ (reflects COVID) and https://rockinst.org/issue-area/balance-of-payments-2020/ (pre-COVID).

A typical summation in the news media looks like this article, https://www.tampabay.com/opinion/2022/01/22/blue-states-pay-...

A typical rebuttal looks like this article, https://thehill.com/opinion/finance/502321-no-blue-states-do... IMO, it rings hollow, except for the accusation of liberals being glib.

From a macro perspective this state of affairs seems to challenge both conservative and liberal beliefs about the effects of government taxation and expenditures.

I've cited the Rockefeller Institute's data elsewhere in this discussion, so am glad that someone else is aware of it.

>A typical summation in the news media looks like this article, https://www.tampabay.com/opinion/2022/01/22/blue-states-pay-...

Ugh, what an awful article. The author, putatively a Floridian, conveniently twists the data to support his thesis:

* He calls Florida a "Republican state". It's about as swingiest a swing state can be right now, and has been such for decades.

* He calls Virginia another "Republican state", I presume because it has a Republican governor. It also has voted for Democratic presidential candidates going back some years. It's also a swing state, but certainly less so than Florida is.

* Worst of all, he cuts off the data to obscure the important point of the Rockefeller data, which is that (as I wrote elsewhere) it's not so much "blue states", but NY/NJ/CT/MA that subsidize the rest of the country. They played the same role a century ago when MA was about as safe a Republican state as any in the country while NY was with OH the most important swing state.

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