One Top Taxpayer Moved, and New Jersey Shuddered

[crazy canuck]

Soon: New Jersey to demand labor instead of gold for tax burden, forces prominent hedge fund manager to run state pension fund for 2 months per year.

[grumbler]

So Tim, income inequality is the problem here and not a tax structure that relies on screwing the rich?

What sort of tax structure would involve somebody who makes 6 billion dollars not paying millions in taxes?

The magical mystery tax code.

A state 9% top rate is pretty shitty.

how about 55%?

The state 9% rate is in addition to a marginal federal rate of 39.6% and a marginal medicare rate of 2.35%.

Aren't state income tax deduced from the Federal income tax?

No.  State income taxes are deducted from federal income in the following year, but not from taxes.

[The Minsky Moment]

You can deduct state taxes paid during the taxable year from income on your federal return.  Thus, the marginal rate is not additive.

[Admiral Yi]

You can deduct state taxes paid during the taxable year from income on your federal return.  Thus, the marginal rate is not additive.

I would have thought that in order not to be additive state taxes would have to be deductible from federal tax, not federal income on which tax is assessed.  I.e., a tax credit as opposed to an income deduction.

[crazy canuck]

You can deduct state taxes paid during the taxable year from income on your federal return.  Thus, the marginal rate is not additive.

Why are the States in a rush to the bottom if the Feds take a hair cut based on State tax policy?  Canadian provinces would love to have that system.

[Eddie Teach]

Why are the States in a rush to the bottom if the Feds take a hair cut based on State tax policy?  Canadian provinces would love to have that system.

Canadian provinces, even the conservative ones, like to provide services to their residents.

[DGuller]

You can deduct state taxes paid during the taxable year from income on your federal return.  Thus, the marginal rate is not additive.

I would have thought that in order not to be additive state taxes would have to be deductible from federal tax, not federal income on which tax is assessed.  I.e., a tax credit as opposed to an income deduction.

Extreme example time:  if Bernie is elected, and both NJ and federal tax rates are flat 100%, but exemptions stay as they are, do I pay 100% or 200% in taxes?

[crazy canuck]

Why are the States in a rush to the bottom if the Feds take a hair cut based on State tax policy?  Canadian provinces would love to have that system.

Canadian provinces, even the conservative ones, like to provide services to their residents.

Yes.  And if States can do it essentially on the Feds dime, why not? 

[DGuller]

Why are the States in a rush to the bottom if the Feds take a hair cut based on State tax policy?  Canadian provinces would love to have that system.

Canadian provinces, even the conservative ones, like to provide services to their residents.

Yes.  And if States can do it essentially on the Feds dime, why not?

No, they don't do it on Feds dime.  State taxes paid are subtracted from federal income, not from federal tax burden.  Feds do in effect fund some of state taxes, but far from all of them.

[Eddie Teach]

Yes.  And if States can do it essentially on the Feds dime, why not?

Ideological purity. Like all the state governors rejecting Medicaid expansion from Obamacare.

[crazy canuck]

Why are the States in a rush to the bottom if the Feds take a hair cut based on State tax policy?  Canadian provinces would love to have that system.

Canadian provinces, even the conservative ones, like to provide services to their residents.

Yes.  And if States can do it essentially on the Feds dime, why not?

No, they don't do it on Feds dime.  State taxes paid are subtracted from federal income, not from federal tax burden.  Feds do in effect fund some of state taxes, but far from all of them.

You misunderstand my point.  If state taxes are deducted from Federal taxes then why wouldn't States charge what they can to maximize local benefit at the expense of the Feds?  Is there a limit on the deduction?

[The Minsky Moment]

You can deduct state taxes paid during the taxable year from income on your federal return.  Thus, the marginal rate is not additive.

Why are the States in a rush to the bottom if the Feds take a hair cut based on State tax policy?  Canadian provinces would love to have that system.

Because they also compete with each other Swiss canton style for tax sensitive business, as per the OP.

[The Minsky Moment]

Why are the States in a rush to the bottom if the Feds take a hair cut based on State tax policy?  Canadian provinces would love to have that system.

Canadian provinces, even the conservative ones, like to provide services to their residents.

Yes.  And if States can do it essentially on the Feds dime, why not?

No, they don't do it on Feds dime.  State taxes paid are subtracted from federal income, not from federal tax burden.  Feds do in effect fund some of state taxes, but far from all of them.

You misunderstand my point.  If state taxes are deducted from Federal taxes then why wouldn't States charge what they can to maximize local benefit at the expense of the Feds?  Is there a limit on the deduction?

IIRC it gets added back in for the federal AMT calculation so that is a practical limit of sorts.

[DGuller]

You misunderstand my point.  If state taxes are deducted from Federal taxes then why wouldn't States charge what they can to maximize local benefit at the expense of the Feds?  Is there a limit on the deduction?

Because the taxpayers still pay more with increased state tax rates?

[grumbler]

You misunderstand my point.  If state taxes are deducted from Federal taxes then why wouldn't States charge what they can to maximize local benefit at the expense of the Feds?  Is there a limit on the deduction?

State taxes are not deducted from federal taxes.  They are deducted from federal taxable income (i.e. you don't pay federal income tax on the money you send to the states - nor, in most states, vice-versa).