I saw this rant too, on its original site. All I can say is: if because of this these idiots learn to dislike income redistribution, it'll be one of the most useful results of this election.
The Blue-State Tax Burden Dems want to soak the rich, but not the states where they live.
BY MARC SUMERLIN Sunday, December 19, 2004 12:01 a.m. EST
Of all the Democratic complaints about the presidential election, the most interesting and ironic came from Lawrence O'Donnell, a leading party strategist and former aide to Sen. Pat Moynihan. He complained on MSNBC that "the segment of the country that pays for the federal government is now being governed by the people who don't pay for the federal government." Mr. O'Donnell added for good measure, "Ninety percent of the red states are welfare client states of the federal government."
[...]
Consider deep blue Connecticut and vivid red Oklahoma. Both have roughly the same number of people, five House members and seven electoral votes. Last year, 1.66 million Connecticut tax filers paid $19.1 billion in personal taxes on $107 billion of adjusted gross income. That makes for an average tax rate of 17.9% in Connecticut. In the same year, 1.5 million Oklahoma tax filers paid $6.6 billion in personal taxes on $54 billion in adjusted gross income, an average tax rate of 12.2%.
[...]
The cost of living in Connecticut is much higher than in Oklahoma. One index of cost-of-living differentials shows that an income of $130,000 in Connecticut is equivalent to $90,000 in Oklahoma. That means families at those incomes are equally well-off and under standard tax theories about fairness should pay the same share of their income in taxes. Currently, a family of four making $130,000 pays $20,450 in income taxes, or 15.7%, while the family making $90,000 pays $8,450, or 9.4%. If both families were taxed at the Oklahoma rate, the Connecticut family would pay $8,200 less.
What to do? One obvious point is that if you have a federal income tax, you can't have tax rates that vary by state. However, this leads inescapably to the mathematical fact that flat taxes are not only simpler by most measures, they are also the only way to deal with the type of unfairness that Mr. O'Donnell complains about. Flatter is fairer. Flat rates coupled with lump-sum credits, for children for example, are a lot closer to producing a "fair" result by what seem to be Mr. O'Donnell's standards than the current multi-bracketed system he has been schooled to think of as "fair."
But this "blue-state tax blues" problem is much more than just an issue of fairness. It also contributes to a pernicious economic and fiscal cycle for the Northeast and other high-cost, high-tax regions. If a family can live as well on $90,000 in Oklahoma as they can on $130,000 in Connecticut, they obviously would require more money from their employer to live and work in a high-tax state. There may be quality-of-life reasons that might induce them not to demand the whole differential, but they would certainly require more. And, of course, if they must pay an additional $8,200 in federal income taxes for the privilege of living in a high-cost area, this would also fit into their calculations.
But from an employer's point of view, it is quite difficult to justify these kinds of differentials, particularly when they are exacerbated by tax differences. As higher-wage jobs leave the overtaxed, higher-cost areas, both the local economy and the state's tax base decline. This often creates a need to raise state and local taxes still further, making those states and regions still less competitive.
The result is that even though most of the taxes are still paid in high-cost states as a legacy of their industrial past, most of the economic growth in the U.S. has taken place in lower-cost, lower-tax states. For example, between 1977 and 2001, real gross state product in New York rose 2.6% annually, 10% below the national average; but it rose 3.6% per year in Texas, 20% faster than the rest. Importantly, this occurred over a period of time in which the real price of oil fell sharply, much to the disadvantage of Texas; it responded by diversifying its industrial base by offering an attractive business environment.
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More on this
The Blue-State Tax Burden
Dems want to soak the rich, but not the states where they live.
BY MARC SUMERLIN
Sunday, December 19, 2004 12:01 a.m. EST
Of all the Democratic complaints about the presidential election, the most interesting and ironic came from Lawrence O'Donnell, a leading party strategist and former aide to Sen. Pat Moynihan. He complained on MSNBC that "the segment of the country that pays for the federal government is now being governed by the people who don't pay for the federal government." Mr. O'Donnell added for good measure, "Ninety percent of the red states are welfare client states of the federal government."
[...]
Consider deep blue Connecticut and vivid red Oklahoma. Both have roughly the same number of people, five House members and seven electoral votes. Last year, 1.66 million Connecticut tax filers paid $19.1 billion in personal taxes on $107 billion of adjusted gross income. That makes for an average tax rate of 17.9% in Connecticut. In the same year, 1.5 million Oklahoma tax filers paid $6.6 billion in personal taxes on $54 billion in adjusted gross income, an average tax rate of 12.2%.
[...]
The cost of living in Connecticut is much higher than in Oklahoma. One index of cost-of-living differentials shows that an income of $130,000 in Connecticut is equivalent to $90,000 in Oklahoma. That means families at those incomes are equally well-off and under standard tax theories about fairness should pay the same share of their income in taxes. Currently, a family of four making $130,000 pays $20,450 in income taxes, or 15.7%, while the family making $90,000 pays $8,450, or 9.4%. If both families were taxed at the Oklahoma rate, the Connecticut family would pay $8,200 less.
What to do? One obvious point is that if you have a federal income tax, you can't have tax rates that vary by state. However, this leads inescapably to the mathematical fact that flat taxes are not only simpler by most measures, they are also the only way to deal with the type of unfairness that Mr. O'Donnell complains about. Flatter is fairer. Flat rates coupled with lump-sum credits, for children for example, are a lot closer to producing a "fair" result by what seem to be Mr. O'Donnell's standards than the current multi-bracketed system he has been schooled to think of as "fair."
But this "blue-state tax blues" problem is much more than just an issue of fairness. It also contributes to a pernicious economic and fiscal cycle for the Northeast and other high-cost, high-tax regions. If a family can live as well on $90,000 in Oklahoma as they can on $130,000 in Connecticut, they obviously would require more money from their employer to live and work in a high-tax state. There may be quality-of-life reasons that might induce them not to demand the whole differential, but they would certainly require more. And, of course, if they must pay an additional $8,200 in federal income taxes for the privilege of living in a high-cost area, this would also fit into their calculations.
But from an employer's point of view, it is quite difficult to justify these kinds of differentials, particularly when they are exacerbated by tax differences. As higher-wage jobs leave the overtaxed, higher-cost areas, both the local economy and the state's tax base decline. This often creates a need to raise state and local taxes still further, making those states and regions still less competitive.
The result is that even though most of the taxes are still paid in high-cost states as a legacy of their industrial past, most of the economic growth in the U.S. has taken place in lower-cost, lower-tax states. For example, between 1977 and 2001, real gross state product in New York rose 2.6% annually, 10% below the national average; but it rose 3.6% per year in Texas, 20% faster than the rest. Importantly, this occurred over a period of time in which the real price of oil fell sharply, much to the disadvantage of Texas; it responded by diversifying its industrial base by offering an attractive business environment.
[...]