Legislation to Eliminate the State Income Tax?

[Detroitnerd]

This all started with the Laffer Curve, which actually made sense.

The argument goes that when you have a punitively high tax rate on economic activity, economic activity goes down because nobody can take a profit on it. So, the argument goes, you lower the taxes to where they're no longer punitive, a profit margin appears, and economic activity goes up, actually raising tax revenues.

In other worse, the whole idea about lowering taxes boosting economic activity originally applied to a very narrow situation that, frankly, we don't see a whole lot of these days.

Since, the argument has been broadened and misappropriated to argue that lowering taxes boosts economic activity.

The idea that if you get rid of the state income tax rich people will relocate here must count as one of the grandest distortions yet of what was, originally, a fairly sound argument.

[Cliffy]

don't worry, they will just shift "fees" to something else. They can't just chop off billions and call it a day, this will end up hurting us even more.

[RaumVogel]

don't worry, they will just shift "fees" to something else. They can't just chop off billions and call it a day, this will end up hurting us even more.

Whathesaid..

[ABetterDetroit]

Maybe they have more money saving ideas like they did in Flint.

[Wesley Mouch]

...
But it's worse than that, because ...snip...will be also be gamed to benefit the wealthy. ...

You mean like the current system... like the Federal mortgage interest deduction -- clearly a benefit to those who are wealthy.

[Cincinnati_Kid]

You mean like the current system... like the Federal mortgage interest deduction -- clearly a benefit to those who are wealthy.

Is this sarcasm ? because I thought the deduction benefited ALL home owners, not just the rich one's.

[Wesley Mouch]

Is this sarcasm ? because I thought the deduction benefited ALL home owners, not just the rich one's.

Now we're most certainly off-thread... but since you asked.

Let's say you're a typical middle-income homeowner with mortgage. Let's say you have a $100,000 mortgage. You payments might be $600/mo. [[My math is very rough, but within reason I hope).

You can deduct $600x12 = $7,200 a year in mortgage payments, lets assume 50% interest, so you get a $3,600 a year deduction in taxable income. Except you already have your standard deduction of $12,000.... so you don't itemize -- and you get ZERO

Meanwhile, the evil abusive heating and cooling contractor down the street in his new McMansion has a $500,000 mortgage. He pays $3,000/mo. in mortgage, about $1,500 in interest x 12 = $18,000 in interest a year. That's $6,000 over the standard deduction ... so he reduces his income by $6k, and at 28% tax rate, he get $1,680 from his Uncle Same for his mortgage.

His uncle, the stock broker has a $3,000,000 mortgage. Do you think he saves more than you on mortgage interest deduction?

The mortgage interest deduction is a rich-man's tool. Not a middle class tax break. Its a tax-wolf in tax-sheep's clothing.

[MikeyinBrooklyn]

The idea of income tax is terrible, in my opinion. If there is one, it should be a low, flat rate that everyone pays, with no deductions. Someone who earns 10x more than you would pay 10x more than you. Any deviation from that simplicity is an example of government choosing favored people and favored behavior. I am not for having choosing which things, people, and actions it approves of.

As far as the Michigan income tax is concerned, I am all for abolishing it, provided how that the government can figure out how it will generate revenue to replace it. In theory, I would be in favor of a sales tax to replace the income tax, but that has some practical consequences [[great for retailers in neighboring states!). I also fear any other taxes announced to replace the income tax would eventually just be in addition to income taxes.

I think a better place for pols in Lansing to start would be to enact limits on unfunded mandates & liabilities [[pensions*, state contributions to Medicaid/Medicare, etc). Worry about whittling down the spending.

*I don't think any gov't should be allowed to promise future pensions for any public employees. It is financially responsible to mandate that any retirement contributions by the taxpayers be made simulatneous with employment, so that when one's service in government ends, so does the taxpayer's obligation to fund that person. It would help prevent pushing true costs out of public view, and also prevent unborn taxpayers from footing the bill for services rendered before they were a voting taxpayer.

[Wesley Mouch]

The idea of income tax is terrible, in my opinion. If there is one, it should be a low, flat rate that everyone pays, with no deductions. Someone who earns 10x more than you would pay 10x more than you. Any deviation from that simplicity is an example of government choosing favored people and favored behavior. I am not for having choosing which things, people, and actions it approves of.

As far as the Michigan income tax is concerned, I am all for abolishing it, provided how that the government can figure out how it will generate revenue to replace it. In theory, I would be in favor of a sales tax to replace the income tax, but that has some practical consequences [[great for retailers in neighboring states!). I also fear any other taxes announced to replace the income tax would eventually just be in addition to income taxes.

...snip...

Couldn't agree more. Although as a Practical Libertarian, I have no problem with a base exemption from income tax. We live in a society where its no longer possible to live off the land -- for the most part. So an exemption [[or even an EIC or negative income tax) may be good public policy.

[Bham1982]

You mean like the current system... like the Federal mortgage interest deduction -- clearly a benefit to those who are wealthy.

The mortgage deduction has income and mortgage amount limits. I wouldn't say it benefits the wealthy, though it does have a disproportionate benefit on the middle and upper middle class.

Basically it benefits higher income folks, rather than the 1%.

[Wesley Mouch]

The mortgage deduction has income and mortgage amount limits. I wouldn't say it benefits the wealthy, though it does have a disproportionate benefit on the middle and upper middle class.

Basically it benefits higher income folks, rather than the 1%.

It also tends to increase home prices*, which further disadvantages those on the lower economic rungs in their efforts to move upward.

* by allowing people to buy a more expensive house, as their effective payments are reduced by the tax credit.

[emu steve]

This all started with the Laffer Curve, which actually made sense.

The argument goes that when you have a punitively high tax rate on economic activity, economic activity goes down because nobody can take a profit on it. So, the argument goes, you lower the taxes to where they're no longer punitive, a profit margin appears, and economic activity goes up, actually raising tax revenues.

In other worse, the whole idea about lowering taxes boosting economic activity originally applied to a very narrow situation that, frankly, we don't see a whole lot of these days.

Since, the argument has been broadened and misappropriated to argue that lowering taxes boosts economic activity.

The idea that if you get rid of the state income tax rich people will relocate here must count as one of the grandest distortions yet of what was, originally, a fairly sound argument.

Not sure of the details to draw accurate comparisons but Kansas and I think Louisiana tried to cut taxes greatly [[under GOP govs) and both have failed miserably.

Louisiana's GOP lost their governorship to the Dems.

[emu steve]

The mortgage deduction has income and mortgage amount limits. I wouldn't say it benefits the wealthy, though it does have a disproportionate benefit on the middle and upper middle class.

Basically it benefits higher income folks, rather than the 1%.

I agree with this statement.

I think there is a mortgage cap of around 1M in the tax code [[was reading about it today.)

After all how many houses sell from 1M+ outside of select markets? [[e.g., NYC, CA, etc.).

What percentages of houses sold in S.E. MI sell for 1M+??? Are we talking less than 1%??

If so, we are talking 'exceptions to the rule.'

[ABetterDetroit]

Couldn't agree more. Although as a Practical Libertarian, I have no problem with a base exemption from income tax. We live in a society where its no longer possible to live off the land -- for the most part. So an exemption [[or even an EIC or negative income tax) may be good public policy.

These radical economic changes the Libertarians seem obsessive about are fascinating I have to admit but not for sounding intelligent.

Look at Michigan. If a piss poor housing market was the ticket to economic prosperity we would be the most vibrant state in the union with plenty of income, population growth and jobs and opportunity for everyone over the years because this state's housing market has been God awful in comparison to other states for decades.

The housing meltdown when the credit market seized nationwide? Yes! Let's work a heavy dose of that into the economy and see what happens again! That was just awesome, nothing like millions of people losing their jobs all at once to "create economic opportunity".

The U.S. Dollar. The only stable currency the world has ever seen. Never hyper inflated or devalued and in more demand than ever on the world market yet for some reason the Libertarians think it needs to be radically messed with. You can ask the rest of the world practically how it works out when your currency is worthless or needs to be converted to an in-demand hard currency to trade anything. Not so good if you like your people to have food to eat regularly.

Isolationism? Don't get me started. Remember: 'Nuclear Weapons' then read a few World War II history books then get back to me.

Then the Libertarians are all excited about Trump, the self proclaimed "King of Debt" who never assembled a pile of cash for any business venture in his life and who has made everything he has on leveraged debt. Is there a better definition of hypocrisy? Not many.

Now there is a "Practical Libertarian"??? Somehow this new development is not that surprising.

[Zacha341]

In the mean time Cali is taxing to death, with another rail line to justify such. Hah!

[ABetterDetroit]

In the mean time Cali is taxing to death, with another rail line to justify such. Hah!

Uh... okay but cali's economy has transformed itself half a dozen times and is again a juggernaut and Michigan's is still rising or failing with one industry.

Maybe it's time actually compete and raise the bar around here instead of wishing that successful states fail and fall to our level? Just a idea.

[Don K]

Uh... okay but cali's economy has transformed itself half a dozen times and is again a juggernaut and Michigan's is still rising or failing with one industry.

Maybe it's time actually compete and raise the bar around here instead of wishing that successful states fail and fall to our level? Just a idea.

This. I've read for at least 40 years that the taxed-to-death economy of CA is on its last legs and will implode any day now. Meanwhile, CA is doing better than ever while MI languishes in the middle ranks. People in MI just can't stop pining for the glory days of the 50s and 60s, which - NEWSFLASH!!! - aren't returning ever.

Back on topic to the thread, KS and LA did the experiment with supply-side economics on the state level, and supply-side didn't deliver the goods but required radical reductions in, e.g., school funding and other basic governmental functions.

[Bham1982]

In the mean time Cali is taxing to death, with another rail line to justify such. Hah!

Calfornia is the job creation center of the country, with a bigger economy than France. It's the innovation capitol of the planet.

Funny how all these "libtard", "taxed to death" places like CA, NYC and the like are the wealthiest, most economically dynamic, most innovative places on the planet.

[Zozo]

Calfornia is the job creation center of the country, with a bigger economy than France. It's the innovation capitol of the planet.

This may not be the case forever. On a long enough timeline, libtards ruin everything under their control. Recently, Nestle, Toyota, and Occidental Petroleum are just a few companies that have left Cali for greener pastures; also many thousands of middle-class residents can't afford to live there anymore. Austin and Colorado are full of Cali transplants. Don't forget Detroit at one time was the innovation capitol of the planet.

[ABetterDetroit]

This may not be the case forever. On a long enough timeline, libtards ruin everything under their control. Recently, Nestle, Toyota, and Occidental Petroleum are just a few companies that have left Cali for greener pastures; also many thousands of middle-class residents can't afford to live there anymore. Austin and Colorado are full of Cali transplants. Don't forget Detroit at one time was the innovation capitol of the planet.

Honestly I don't have a dog in this fight. I like the policies that make sense to me, some conservative and some liberal though there seems to be very little in the middle these days. If there were, I would bet that I would like some of those as well.

Back to your examples about Austin and Colorado. Let's point out that you singled out the most liberal city in the great state of Texas and the most rapidly changing progressive state in the entire nation where even half the minority of republicans look kinda liberal. Both of their economies are downright booming.

Not exactly a real Dick Tracy moment for your side.

[Don K]

This may not be the case forever. On a long enough timeline, libtards ruin everything under their control. Recently, Nestle, Toyota, and Occidental Petroleum are just a few companies that have left Cali for greener pastures; also many thousands of middle-class residents can't afford to live there anymore. Austin and Colorado are full of Cali transplants. Don't forget Detroit at one time was the innovation capitol of the planet.

Yes, and then Detroit became afraid of the future, terrified of upsetting the apple cart. So far I'm not seeing that in CA. This post is an example of the "They're doomed, DOOMED! I tell ya!" talking about CA so prevalent on the right for at least 40 years now.