Why should the federal government subsidise runaway state taxes though? Which colour states does that advantage? And what kind of incentive does that create for states?
If the residents of California and New York want lower state taxes, I strongly encourage them to lobby / vote for lower state taxes, rather than demanding to be subsidised by poorer states.
Edit: I'm seeing responses to things I'm "suggesting" or "essentially arguing", but which actually appear nowhere in what I wrote. My comment is about the SALT deduction.
So you’re essentially arguing “Poor/Red” states need an even larger handout from “Rich/Blue” states.
As to lowering state taxes, high taxes are a major reason rich states are rich. People want the services those taxes provided.
Edit: to respond to the comment below: I’m not arguing that local taxes should be low; in fact, I think property taxes should be much higher and fairer in California. My point is that the federal government should not provide a federal tax break for local spending e.g. on education. The coasts already do too much opportunity hoarding.
The winner takes all nature is a result of those high taxes and the services they provide. Arguing for lower state taxes in rich states is arguing to destroy the very thing that enables these subsidies in the first place.
NYC for example couldn’t survive without the infrastructure its taxes pay for.
The federal balance of payments with the various states is a function of tax receipts from that state against federal spending in that state. States with lots of high income earners will, by progressive taxation, naturally contribute more to the federal pool. States with lots of recipients of federal benefits, on the flip side of the coin, naturally receive more from the federal pool. There are outlier states on either side.
Looking at 2019 data as the last "normal" year (since post-Covid, every single state received more in federal spending than they gave in taxes), Connecticut, Massaschusetts, and New Jersey (all blue states) are the clear outliers in per-capita balance of payments, where each resident in net gave north of $2000. Among outliers in the receivers, Kentucky, New Mexico, and Virginia (one red state, two blue states) stand out . KY I'm not sure why, but NM and VA are clear destinations for lots and lots of federal spending, with many federal programs being run in those states. California is touted as "paying" for a lot of stuff, but on a per capita basis it was only about $300.
Among the rest, there are a good mix of red states and blue states that receive more than they pay. Alabama? Red state, net recipient. Maryland? Blue state, net recipient. Utah? Red state, net payer. Washington? Blue state, net payer.
That having been said, the implicit argument behind your point is that blue states are rich because of their blue policies and red states are poor because of their red policies. I have yet to be convinced of this.
Work out how much that 300$/year from birth would add to someone’s retirement and say it’s not a lot of money.
It's the multitude of exceptions that prevent individuals from deducting necessary and customary expenses required to earn their income that are the problem. Glaringly - a W2 employee needs a car to get to work? Or more recently, a W2 employee needs a home office to work remotely? The tax code says fuck em, they can pay for those twice!
The disparity is why the plebs get all uppity when some ragebait article highlights some seemingly-ridiculous expense that businesses write off. When the right answer is to make it so that individuals can deduct expenses the same way businesses do.