Tuesday, November 22, 2011

Ulterior motives?

So after visually seeing how taxes are allocated on the federal and state levels on xkcd yesterday, something that should have been rather obvious occurred to me.

The political right has been pushing hard for smaller federal government lately, and letting the states individually run everything from healthcare, to education, to infrastructure and to environmental protection. The argument has always been that more local government would better understand and more efficiently serve their constituents needs and wants. It doesn't make that much sense to me since I actually have experience in how economies of scale work, but I can at least understand their argument of states' rights to an extent.

The trick is though, daddy is gonna have to be paid, some way, some how. The roads aren't going to build themselves, the water isn't gonna treat itself, the kids aren't gonna educate themselves. While they would have you believe that 90% of the money that goes to the IRS disappears into a black hole never to be heard from again, the truth is the vast majority of that money goes to things that are extremely worthwhile and would be sorely missed if they were gone. The truth is that the people would still demand these services, just the state would have to start picking up the tab. As federal income tax goes down, state taxes will have to go up. So essentially they are trying to shift the burden of taxation from the federal level to the state level.

Here's the real rub though: while federal taxes are progressive, state taxes are regressive. They will shift the burden of taxation further down the food chain in a more covert manner than what they have been trying to accomplish in the US Congress. It's just one more way to reduce the taxes for top 1%, especially since it is so much easier to loophole your way out of state taxes than federal ones.

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